THE WORKERS' COMPENSATION STUDY COMMISSION OF 1977-79 AND ITS IMPACT ON WORKERS'

COMPENSATION LEGISLATION

DOUGLAS P. SEATON FEBRUARY, 1981

STATE OF MINNESOTA

HOUSE OF REPRESENTATIVES

RESEARCH DEPARTMENT

17 STATE CAPITOL

Sr. PAUL, MINNESOTA 55155

This document is made available electronically by the Minnesota Legislative Reference Library as part of an ongoing digital archiving project. http://www.leg.state.mn.us/lrl/lrl.asp

PREFACE

Minnesota's workers' compensation system provides medical expense reimbursement and income-replacement benefits for virtually every employee suffering a work-related disability. Employers must provide workers' compensation insurance or self-insure to pay these benefits and the annual premiums which they pay total nearly $500,000,000. There are almost 60,000 claims for some type of workers' compensation benefits every year.

Minnesota was one of the pioneers of statutory compensati.on for industrial accidents in 1913. But in the past few years there has been considerable criticism of the workers' compensation system, though the basic structure of the system is unchallenged. Critics complain that costs have become a serious problem for business in the state and that appropriate benefits could be provided at much less expense.

In 1977 the Legislature created the Workers' Compensation Study Connnission to investigate the problems with the workers' compensation system and reconnnend changes. After an intensive two year effort that body recommended 57 reforms, most of which were enacted into law in 1979. Those changes represent the most significant reform of the industrial accident compensation system in several decades.

Knowledge of these changes and their impact is vital for an understanding of workers' compensation issues. Debate over workers' compensation continues, of course, but it is certain that any further efforts to improve the system will begin with the 1979 Workers' Compensation Act and the Study Commission report, upon which it was based. This report on the work of the Workers' Compensation Study Commission, its recommendations, the legislative debates over those recommendations and the resulting legislation should thus be of considerable assistance to legislators as they evaluate further proposals for reform of the workers' compensation system.

This report was written by Douglas P. Seaton, Legislative Analyst in the Minnesota House of Representatives Research Department. Questions or comments on the issues raised in this report or on other employment-related issues should be addressed to Mr. Seaton at 296-5059.

Peter B. Levine, Director Minnesota House of Representatives Research Department

TABLE OF CONTENTS

I • INTRODUCTION . . . • • . . . . . . . . . . . . . • . . . 1

II. THE WORKERS' CO:MPENSATION STUDY COMMISSION .•...•. 3

A. The Concerns of the Constituencies Affected by Workers' Compensation Legislation ........ 5

B. The Recommendations of the WCSC .......... 6

III. COMPARISON OF THE HOUSE AND SENATE BILLS •.•..•• 13

IV. COMPARISON OF THE WCSC REC01:1MENDATIONS AND THE FINAL LEGISLATION .......•.. 14

V. ANALYSIS OF THE FINAL LEGISLATION IN LIGHT OF THE GOALS OF THE WCSC . . . . . . . • . . . • • . • . . 19

VI. CONCLUSION . . . . . • • . . . . . . . . . . . . . . . 24

FOOTNOTES . . . . . • . . . . . . . . . . . . . . . . . 25

APPENDIX A

APPENDIX B

47

63

APPENDIX C . . . • • • . . . . . . • . . . . . . . . . . 7 4

I. INTRODUCTION AND SUMMARY OF THE MAJOR 1979 REFORMS

During the 1979 extra session of the Minnesota Legislature,

a series of major revisions to the workers' compensation statute

were enacted. 1 This legislation2 was the culmination of a two-year

study by the Workers' Compensation Study Commission. The Commission's

recommendations, most of which were enacted, represented an effort

to respond to the concerns of all constituencies affected by the

workers' compensation system. Since nearly all employees and employers

are subject to the workers' compensation system, and since the legal,

medical, and educational professions are intimately involved in

its administration, the impact of the new legislation will be felt by

most Minnesotans.3

The workers' compensation statute is amended nearly every

session, but the changes in 1979 were more sweeping than any since

1937, when the employer's option to choose tort liability instead

of liability under the statute was repealed. 4 The retraining and

rehabilitation provisions of the new legislation entirely replaced

those of the old statute.5 In addition, a mandatory reinsurance

association and a new reopened case fund were created. 6 Though

a provision creating a state-operated workers' compensation insurance

company was deleted from the bill, another commission was charged to

study the feasibility of such a fund. 7 The workers' compensation

insurance rate-making and regulatory sections were entirely rewritten

Page 2

and rate hearings were brought under the contested-case provisions

of the Administrative Procedure Act. 8 The self-insurance program was

modified substantially and transferred to the insurance division.9

A number of benefit provisions were amended and several changes

affecting medical services and opinions also were made, including a

second surgical opinion program.IO Furthermore, several changes

will affect workers' compensation attorneys.11 A great many additional

changes were made to improve the administration of the workers'

compensation system.

The investigation conducted by the Workers' Compensation

Study Commission was very comprehensive. The resulting legislation

made many significant changes in the system of industrial accident

compensation in Minnesota which merit a comprehensive review. In

addition, the lengthy discussions over workers' compensation in

the Workers' Compensation Study Commission and the 1979 Legislature

have helped to shape the terms of the debate over workers' compensation

generally, including those issues not addressed by the 1979 legis­

lation. A review of the work of the study commission and the resulting

legislation should thus illuminate current - or future - areas of

controversy in workers' compensation. The purpose of this report

is to examine the recommendations of the Workers' Compensation

Study Commission and the provisions of the 1979 legislation and to assess

their impact both upon the workers' compensation system itself

and the debate over workers' compensation reform.

Page 3

II. THE WORKERS' COMPENSATION STUDY COMMISSION

The Minnesota Workers' Compensation Study Commission (WCSC)

was created by the 1977 Legislature.12 The WCSC interpreted its

charge as a broad mandate to consider any changes that might reduce

workers' compensation costs.13 The creation of the WCSC and the

legislation of 1979 were spurred by several events. Workers'

compensation costs in Minnesota had risen dramatically since the

early 197O's These expenses had become an increasing burden on

employers. Since workers' compensation costs were significantly

lower in several of Minnesota's neighboring states, these costs

became a major "business climate" issue in the 1978 elections.14

The origins of these increased costs were examined by the WCSC,

but no definitive conclusions were reached. Some attributed the

increase to what was said to be the "liberal" direction of both new

legislation and judicial interpretation of the statute since 1973.15

Thus, there was pressure for change in the rules of liability,

benefit levels, and even in the composition and powers of the workers'

compensation courts. Others argued that the cost increases were

caused by excessive administrative costs and profits among insurers. 16

The policy this faction sought to implement included new restrictions

on insurers, increased regulatory powers, and a combination of more

private competition, increased self-insurance, or a new state workers'

compensation insurance company.17 Another view attributed increased

costs to inefficiencies in the administration of the law, poor

information, inadequate claim processing and rehabilitation services,

Page 4

and unnecessary litigation. 18 The program suggested by this group

stressed quick service for the claimant, better information, speedier

resolution of disputes, better rehabilitation services, and fewer

incentives to litigate. 19 Each of these perspectives was considered

during the deliberations of the WCSC and each was, to some degree,

reflected in the final legislation. In addition, the work of the

National Commission on State Workers' Compensation Laws had an

influence upon the WCSC and the final legislation.20

In summary, a history of legislative changes generally

favorable to the employee and relentless increases in premium costs

formed the backdrop for the deliberations of the WCSC. The core

agenda of the WCSC, therefore, was not whether to cut costs, but

simply how to do so.

The members of the WCSC were appointed in August, 1977

and the Connnission held its first meeting on September 1, 1977.21

The WCSC was chaired by Senator Steve Keefe, who gavelled forty

WCSC meetings to order between September 1977 and February 1979. 22

At its final meeting, the WCSC approved fifty-seven recommendations

for legislative or administrative action and concluded its work by

issuing a 320 page report explaining the recommendations and examining

twenty-one separate workers' compensation subject areas. 23 Sixteen

minority reconnnendations from the WCSC also appeared in the report. 24

Page 5

A. The Concerns of the Constituencies Affected by Workers' Compensation Legislation

The reconnnendations of the WCSC do not readily fall into any par­

ticular legal theory of employment disability compensation.25 While the

WCSC seriously studied the issues within its purview, it did not conduct

itself merely as an academic study group, still less as a court. Instead, the

WCSC was a political body, in the sense that its deliberations repre-

sented an attempt to respond to dissatisfaction with the workers' com­

pensation system and to impose the burdens of reform equitably on each

affected group. This was far from an easy task, given the divergent per­

spectives that existed.

Employers voiced concern to the WCSC over premium increases, in­

adequate rehabilitation, high benefits, impediments to self insuring, "lib­

eral" administration of the law by the courts, malingering claimants,

insufficient service by insurers, lack of information from both insurers

and the Department of Labor and Industry, and the disproportionate impact

of cost increases on small business.26 Labor focused on preventing reductions

in benefit levels and on raising the maximum benefit.27 Employee repre­

sentatives favored expansion of joint self-insurance by groups of employers

and a state-run workers' compensation insurance company, as well as increased

regulatory authority for the Connnissioner of Insurance.28 Both employers and

labor tended to agree on the necessity for increased procedural formalities

and broader participation in the rate hearings.29

The insurance industry was on the defensive thnoughout the

deliberations of the WCSC, since labor and employers in varying degrees

Page 6

attributed increased premium rates to the insurers' inefficiency and "excess

profits". The representatives of the insurance industry nonetheless sought

to reduce the large amounts and long periods of potential liability arising

from each injury, arguing that these, and expanded benefits, were the reasons

for the increase in premium levels. 30 Medical practitioners were also in a

reactive position, especially regarding the issues of second medical opinions,

disability schedules, neutral medical testimony, rehabilitation, and fee

limitations.31 Attorneys were divided between the plaintiffs' and defense

bar, and their viewpoints generally followed those of their clients.

Attorneys focused on the rules of liability, benefit levels, settlement

procedures, fees, rehabilitation, apportionment of liability, and the several

proposals affecting medical evidence and fact finding.32

B. The Recommendations of the WCSC

The fifty-seven recommendations of the WCSC were adopted in

outline form in the two penultimate sessions of the WCSC, though nearly all

were the subject of extensive testimony and staff work during the previous

two and one-half years. The first thirteen recommendations dealt with

benefits. 33 Eight recommendations were intended to prevent the receipt of

overlapping or excessive benefits. Claims for both retraining and temporary

total or other weekly benefits, or for permanent partial benefits, were to be

denied, but benefits were to be increased uniformly by fifteen percent in

retraining situations.34 In addition, as an incentive to return to work,

permanent partial benefits were to be withheld until employment resumedo35

The third WCSC recommendation was that the minimum temporary total benefit

be repealed so that no employee would receive benefits in excess of the

usual sixty-six and two-thirds percent of his wages.36 Other recommendations

permitted recovery of benefits paid by mistake37 and required reduction of

Page 7

benefit amounts when a previously compensated disability contributed to the

new injury. 38 Recommendations 8 and 9 provided for a specific schedule

of benefit amounts for internal organ injuries39 and removed the presumption

that certain peace officers' conditions were work related. 40 The most

significant benefit reduction was Recommendation 7, which limited inflation

adjustments to claims at least two years old.41

While these recommendations would reduce costs, four other benefit

recommendations would tend to increase costs. The most significant of these

was the proposal to increase the maximum benefit payment from 100% to 200%

of the statewide average weekly wage.4 2 The other three benefit increases

provided that a student could receive survivor benefits to age twenty-five, 43

extended mandatory workers' compensation coverage to elected and appointed

public officials,44 and required currently due benefits to be paid to relatives

after the unrelated death of an injured employee.45 WCSC Recommendation 10 J

extended the irrebuttable presumption of dependency for wives of deceased

employees to husbands, but limited its application to two years from the

injury, after which time fifty percent of any earned income would be subtracted

from death benefits.46 Recommendation 40 also indirectly affected benefits

by limiting the potential for duplicative recoveries by the injured worker

from fellow employees to cases of intentional or grossly negligent acts.47

Recommendation 57, also relating to benefits, provided that pain should continue

to be considered in determining proportional disability.48

Recommendation 14, the most detailed, involved a systematic

revamping of workers' compensation retraining and rehabilitation procedures.

The essential features of this proposal were its stress on employer-provided

~age 8

rehabilitation and on-the-job training, specific procedures for approval of

rehabilitation plans and rehabilitation providers, central administration of

the rehabilitation system by the Department of Labor and Industry, and clear

allocation of specific costs of rehabilitation to the employer.49

Recommendations 15 through 28 involved the administration of the

workers' compensation statute by the Department of Labor and Industry and

the workers' compensation courts.SO Three recommendations dealt with notice

by the employee and employer of the fact of injury. These were intended to

accelerate the processing of claims by requiring employer notice to the

insurers, 51 providing that routine medical carrier treatment forms are not

notice of a work-related injury when work-relatedness is not indicated, 52

and exempting severely incapacitated employees from the 180 day notice

requirement. 53 Recommendation 41 also provided for a preliminary notice by

employees to employers when changes in benefits were sought.54

Several recommendations considered changes in the workers'

compensation courts. Recommendation 25 mandated expansion of the Workers'

Compensation Court of Appeals from three to five members, two representing

employers, two representing employees, and one representing the public. 55

Two members could be nonattorneys. 56 . Another recommendation provided that

the appeals court be physically separate from the offices of the Department

of Labor and Industry,57 and the last,permitted consideration, in the judge's

discretion, of an attorney's workers' compensation expertise in fee determin­

ation. 58

Recommendations 29 and 47 were both responses to the problem of

the "long tail" in workers' compensation liability.59 The extensive duration

and potential expense of liability for individual injuries exacerbates cost

Page 9

pressure because insurers, under standard actuarial procedures, must anti-

cipate this potential future expense by reserving the necessary funds in the

present. The WCSC responded by reconnnending the creation of two new funds:

the Reopened Case Fund and the Reinsurance Fund. The two funds were designed

to limit the exposure of insurers to definite time periods without imposing

a short statute of limitations on claims. The Reopened Case Fund was to be

responsible for benefits when a claim was reopened after seven years from the

injury or three years from the last benefit payment, with a final statute of

limitations eighteen years after the injury or eight years after the last

payment, whichever date was later.60 The Reinsurance Fund was to be respon­

sible for payments on claims that continued for five years after the date of

injury, without time limitation. 61 The Reopened Case Fund would be funded by

a flat assessment on premium, as is done with the Special Fund,62 while the

Reinsurance Fund would be funded by premiums to be paid by insurers and

self-insurers.63

Recommendations 30 through 33 affected the Special Fund, which

pays benefits when certain preexisting conditions are aggravated by a work

injury. 64 The WCSC proposed removal of the requirement that employers

register an employee's preexisting condition before the aggravating second

injury occurs65 and reconnnended that investment income to monies in the fund

be retained rather than be directed to the general fund. 66 The liability of

the fund was also bo be extended to aggravation of any previous injury when

67 the employee was enrolled in an on-the-job training program. The fund would

also pay any benefits due on a claim when liability between insurers or

employers was disputed, and be reimbursed after that determination. 68

The WCSC made several medical recommendations. 69 One provision

was that either party have the right to a neutral physician's evaluation of

Page 10

the medical issues. 70 Another recommendation was that a second medical

opinion should be required before certain elective surgical procedures are

used.71 A related recommendation was that health insurance carriers provide

medical treatment when disability was disputed between the health and

workers' compensation carriers, with reimbursement if workers' compensation

liability was established.72

Rec01mnendations. 37 through 39 and 42 through 57 relate to the

rate-making process and the regulatory role of the Commissioner of Insurance

in that process. 73 Additional professional staff were to be provided to the

Commissioner74 and the salary ceiling in effect for the actuary's position

was to be removed.75

· Among the last recommendations were several that addressed

specific rate and classification practices. Many of these were recommendations

to the Commissioner of Insurance, rather than proposals for statutory action.

The traditional insurance practice of allocating cost increases due to changes

in benefit levels back to the period of premium coverage was to be halted76

and replaced by a premium increase to take effect the same date as the benefit

changes, January 1 of each year. 77 The WCSC also concluded that employers

should be permitted to divide an individual employee's wages between different

rating classifications when different duties were involved so an employer

could take advantage of lower rates in one of the classifications. 78

One proposal, designed to assist small employers, provided that the experience­

rating system of modifying premiums be extended to those paying less than a

$750 annual premium. 79 Another recommendation sought to provide some workers'

compensation relief to employers who paid higher wages than others in the

same industry by establishing a minimum wage base for calculation of premiums,

as with social security.BO

Page 11

Another group of WCSC recommendations affected the manner in

which case reserves and claim expenseB· ,were handled by insurers. The

WCSC recommended that the Commissioner of Insurance require insurers to

utilize life expectancy tables that are modified to take account of disabilities. 81

Similarly, the filing of additional details about claim reserves82 and the

reporting of every claim reserve above $50,000 were recommended. 83

Recommendation 56 provided that investment income on reserves be considered

in establishing premium rates.84 Another recommendation was that insurance

company administrative expenses for assigned-risk pool premiums and for

regular premiums be equalized to avoid any incentive to deny regular coverage.BS

The WCSC also recommended several changes in the regulatory role

of the Commissioner of Insurance and in the rate-making and classification

determination processes. Recommendation 49 sought proposals from the

Commissioner of Insurance to the Legislature on the appropriate manner of

conducting the rate hearings themselves. 86 Another procedural recommendation

provided for employer appeal from an occupational classification determination

by the Rating Association. 87 Recommendation 44 permitted the Commissioner of

Insurance, during the rate-making process, to review the propriety of any

automatic premium increase generated under Recommendation 43. 88

There were a number of minority recommendations endorsed by

different members of the wcsc. 89 One of the most controversial was a

proposal for the creation of a nonprofit, state-run workers' compensation

insurance company that would compete with private workers' compensation

insurance carriers.90 The WCSC itself had declined to recommend such a

"state fund". 91 Other minority recommendations that responded to WCSC

proposals included opposioion to the Reinsurance Fund,92 proposals for

apportionment of liability when a previous condition contributed to a new

disability,93 reduction of permanent partial benefits for workers over age

Page 12

fifty-two, 94 and retention of the state average weekly wage as a workers'

compensation benefit maximum. 95 Others opposed all WCSC benefit reduction

proposals96 and suggested that the Connnissioner of Insurance, rather than

the Rating Bureau, prepare the actual workers' compensation premium rates.97

Additional minority proposals included a presumption of reasonable­

ness for settlements between parties represented by counsel,98 permission

for a workers' compensation judge to enter a medical finding of fact at

variance with those offered in evidence,99 removal of the inflation adjust-

ment for permanent partial benefits,100 and calculation of benefits to the

nearest dollar. 101 Other minority proposals suggested that the rating

bureau be representative of employers, employees, and the public, as well as

insurers,lOZ that the National Council of Compensation Insurers be excluded

from involvement in rate making,l03 that Congress be asked to remove the

antitrust immunity of the insurance industry,104 that the former statutory

maximum for insurer administrative expenses and profits be reinstated,lOS

and that vacation, holiday, and sick time be excluded from workers' compensation

premium calculations. 106

A final group of proposals were those offered for consideration,

d f db h Wcsc d t ff d . . d . 107 e eate y t e , an no o ere as minority reconnnen ations.

Several of the proposals were considered anew by the Legislature.108

These defeated motions included proposals to limit death benefits to 1000

weeks, 109 to permit insurer competition in premiums generally or in the

amount of. the administrative expense allowance, 110 to allow payment of

attorney's fees from supplemental benefits in all cases, 111 and to allow

reimbursement of a claimant's attorney's fees when he intervenes in a

liability dispute between the Special Fund and an insurer or employer. 112

Page 13

III. COMPARISON OF THE HOUSE AND SENATE BILLS

The report of the WCSC was formally issued to the Legislature

and the Governor on February 19, 1979, and identical legislation embodying

its reconnnendations was introduced in both houses shortly thereafter.113

The 1979 Workers' Compensation Act, however, was not finally passed by the

House and Senate until May 24, 1979. 114 The intervening weeks of connnittee,

floor, and conference action saw many significant changes in the original

WCSC reconnnendations. In the course of this legislative process, the House

and Senate bills came to differ in some important respects.

One significant difference between the House and Senate involved

the state-run workers' compensation insurance company proposal, which the

Senate supported and the House opposed. 115 Ultimately the Senate conceded

and the House proposal for a study connnission to consider the feasibility of

such a fund was adopted.116 The house also sought to increase the WCSC

recommendation that retraining benefits equal 115% of temporary total benefits

to 125%, to which the Senate agreed. 11 7 The House version of the rehab­

ilitation section, which increased employee control over the rehabilitation

provider, permitted greater job mobility through rehabilitation, and lessened

the role of on-the-job training, was also reflected in the final legislation. 118

The House increased supplementary benefits from sixty to sixty-five

percent of the state average weekly wage, 119 removed the WCSC-recommended

statute of limitations from the Reopened Case Fund,12O and extended existing

penalties for unwarranted failure to pay medical arid retraining expenses. 121

These positions all prevailed, though the Senate insisted on allowing

discontinuance of benefits prior to a hearing when reasons for discontinuance

were offered.122

Page 14

The Senate convinced the House that the Workers' Compensation

Court of Appeals should be increased from three to five members and that the

two new members need not be attorneys. 123 The House also conceded that each

party could solicit the opinion of a neutral physician.124 The Senate

prevailed on several provisions related to rate making and rate application;

insurers were to provide additional information on losses, reserves, and

investment income,125 assigned-risk policies were to be treated equally with

other policies in expense allowances,126 and independent contractors were to

be permitted an alternative rate when payroll could not be ascertained.127

Finally, there were differences between the two cha~bers in the details of

the Reinsu~ance Associatllion. 128

IV. COMPARISON OF THE WCSC RECOMMENDATIONS AND THE FINAL LEGISLATION

The 1979 Workers' Compensation Act ultimately included forty-six

of the fifty-seven WCSC recommendations in substantially the same form in

which they were proposed. Three recommendations were significantly modified129

and eight recommendations were not enacted. Two minority recommendations

were passed and another provision of the statute was related to a proposal that

was not adopted by the Commission. 130 One minority recommendation was to be

studied further.131

The major-differences between the WCSC report and the final

legislation involved benefit provisions. The WCSC opposed the concurrent

payment of permanent total ·and partial benefits in order to encourage a

return to work, but such payments are still permissible under the new

legislation. 132 The WCSC sought to repeal the temporary total minimum benefit,

since it provided some part-time employees with tax-free benefits greater

than their actual earnings, but this minimum was retained in the 1979 law.133

The WCSC proposal that a benefit award be reduced by the amount of any

Page 15

workers' compensation, tort, or other reimbursement for any previous injury

that contributed to the new disability was also deleted from the new

legislation. 134 The two-year "waiting period" recommended by the WCSC

before the cost-of-living adjustment would operate to increase a claimant's

benefits also was not adopted by the Legislature. 135

Another benefit recommendation rejected by the Legislature

concerned the rebuttable presumption that heart disease and pneumonia among

firemen and peace officers are work related and thus compensable. The WCSC

recommended that this presumption be repealed, but the Legislature retained

it and added state forest officers to those enjoying the benefit of the

presumption. 136 The original WCSC recommendation for deleting sexual reference

in death benefits involved two provisions: both husbands and wives conclusively

would be presumed dependent on an employee who suffered a work-related death

and, after two years, benefits would be reduced by fifty percent of any

d . 137 earne income. The Legislature, however, dropped .bhe offset prov.ision.138

The Legislature also rejected two WCSC recommendations that

would have increased benefit costs. The Commission had recommended that the

maximum benefit of 100% of the state average weekly wage be increased to

200%, so that those earning more than 150% of the state average weekly wage

would receive benefits equal to sixty-six and two-thirds. percent of their

actual earnings, as do employees earning less. 139 This would have been a

very costly item, however, and the Legislature, concurring with a minority

recommendation, struck that provision. 140 The Legislature also omitted the

WCSC recommendation that workers' compensation coverage for public officials

be mandatory, rather than optiona1.141

Page 16

There were five other significant differences between the WCSC

report and the final legislation. While the Legislature increased the number

of Workers' Compensation Court of Appeals judges from three to five and

provided for no more than two lay judges, 142 as the WCSC had recommended, it

did not institute the proposed restoration of the representative character

of the court. 143 The WCSC proposal that the court consist of one public,

two employer and two employee judges144 was rejected by the Legislature.

The WCSC had also recommended that notice to an employer of treatment of an

employee by a medical carrier not be deemed notice of a work-related injury,

unless the,, work-related nature was made explicit • 145 This proposal was

rejected by the Legislature, 146 apparently because some of its members thought

that penalizing the employee for the medical carrier's omission was unfair.

Another WCSC recommendation that was not incorporated in the

statute was the proposal that a maximum wage base be established for

workers' compensation premium purposes to avoid extra cost to those paying

higher wages when no additional accident-exposure time was involved. 147

It was feared, however, that this would tend to shift workers' compensation

costs from larger to smaller employers. The Legislature, however, did

adopt two minority recommendations: exclusion of vacation, holiday, and sick

time from payroll for premium purposes, 148 and retention of 100% of the

state average weekly wage as the benefit maximum. 149 Since there is no

accident exposure during periods of vacation and the like, to include them

tends to increase the actual work-time premium rate for employers with

generous leave pililicies. The new legislation also incorporated what came to

be known as the "Robinson amendment", a provision permitting workers' compen­

sation insurers to charge lower premiums than the rates approved at the rate

hearing.lSO The WCSC had rejected two similar proposals. One of these sought

full scale competi:tion in workers' compensation insurance premiums instead of

Page 17

regulated rate making. 151 The other provided for competition in the expense

allowance but retained the rate-making process.152

In other respects, the final legislation was consistent with

WCSC recommendations. The benefit recommendations relating to overpayments, 153

the scheduling of internal organ154 and other disabilities, children's survivor

benefits, 155 and payment of accrued benefits156 were all enacted. Though

these were modified, the Legislature also enacted the recommendations dealing

with retraining benefits, 157 spousal death benefits, 158 and delay in payment

of permanent partial benefits. 159 The comprehensive rehabilitation and retraining

section was incorporated with only slight changes. 160 Most of the WCSC

recommendations dealing with the administration of the workers' compensation

system by the Commissioners of Labor and Industry, and Insurance, were passed.

These included a proposal for consideration of workers' compensation

expertise in determining attorneys' fees. 161 The recommendation relating to

medical fee review was also enacted after some modification. 162

Though the details of their structure and liability thresholds

163 were modified, both of the major new funds, the Reopened Case Fund and

the Reinsurance Association, 164 came through the legislative process largely

intact. This was also the case with the WCSC-proposed expansion of the liability

of the existing Special Fund to cases of on-the-job training injuries, 165

unregistered preexisting disabilities,166 and disputes of liability. 167

The Commissioner's recommendation that investment income be

retained in the Special Fund also survived. 168 The proposals for neutral

physicians' opinions, 169 second surgical opinions, 170 and temporary payments

by a health insurance carrier when liability is disputed with a workerst

Page 18

compensation carrier171 were also enacted. The limitation on coemployee

liability to instances of intentional or grossly negligent acts was passed

as well. 172

The WCSC had offered the Commissioner of Insurance several

recommendations directed at the rate-making process and the Commissioner

responded with statutory proposals. The Legislature then enacted several of

these proposals, so that most of the WCSC recommendations relating to rates

were more than fully implemented. Enacted were the substitution of pros­

pective for retroactive rate adjustments for legislated benefit changes, 173

simultaneous adjustments in rates and benefit changes, 174 the division

of an individual employee's wages among separate rating classifications when

appropriate, 175 the development of actuarial tables suitable for the disabled, 17Q

and the reporting of more detailed loss and reserve information by insurers,177

as well as information on investment income accruing to reserves. 178

The administrative expense allowance on assigned-risk policies was required to

be no more than that approved for other policies, as had been reconnnended. 179

The Commissioner was also empowered to study the expansion of experience­

rating plans to smaller employers. 180 The most comprehensive statutory

changes involved enactment of the Commissioner's proposal for new procedures,

based on contested-case provisions, rather than the existing rule-making hearings. 18

The Commissioner received the power to review rate changes attributed to

legislative benefit increases, 182 , to make decisions on an employer's occu-

pational classifications, 183 and to consider investment income accruing to

reserves in the rate-making process. 184 The statute did not incorporate the

maximum workers' compensation insurance wage base proposal185 and the expansion

Page 19

of experience rating to smaller employers was to be studied rather than made

mandatory. 186

V. ANALYSIS OF THE FINAL LEGISLATION IN LIGHT OF THE GOALS OF THE WCSC

It is perhaps too early for any comprehensive analysis of the

legal and economic impact of the 1979 workers' compensation legislation, but

it may be useful to attempt a provisional assessment of the compromises

embodied in this legislation and their effect on the competing demands

heard by the WCSC for higher benefits, lower costs, more regulatory safeguards,

increased competition, less "liberality" in administration, decreased

litigation, and a direct role for the state in the workers' compensation

insurance business.187

The points of identity between the WCSC recommendations and the

final legislation may suggest relatively settled policy, while the points of

divergence perhaps indicate areas in which policy is unsettled. In any case,

a comparison of the two, together with an assessment of the workers' compen­

sation issues unresolved by the legislation, gives a fairly good indication

of the future direction of the law in this area, given the relatively

intense study and debate on workers' compensation that characterized the

WCSC and the 1979 legislative hearings.188

The benefit recommendations of the WCSC fared worst in the

legislative process.189 The political pressure to decrease costs, the analysis

of serious disincentives to return to work in the current law, the orthodox

wage replacement theory, the perception that abuses were possible in the

benefit system, and particularly, the adverse reaction to "double-dipping"t

led the WCSC to recommend several changes that would have reduced benefits

in some cases. The Legislature, however, rejected most of these, while it

Page 20

enacted all but one of the benefit increases or expansions of coverage and

liability that were reconunended, together with some others. 190

Though some claimants under the new legislation will receive

decreased workers' compensation benefits as compared to the unamended

statute, more will receive greater payments.l9l In addition, new groups

will qualify for benefits for the first time. 192 The contrast between the

1979 law and the WCSC reconunendations, which would have reduced previous

statutory benefit levels and provided offsets against some of the new

increases, is even more dramatic. It is difficult to estimate the cost of

a provision such as the 200% state average weekly wage benefit maximum,

which would have increased benefit levels for those earning between roughly

$18,000 and $30,000. It does seem likely that actual benefit payments to

these workers would be much less than their proportion in the work force

since the risk of physical injury tends to be far less at these income levels

than for the largely blue-collar jobs at lower income levels. 193 Thus, even

considering the 200% maximum, which most observers assumed would quickly be

deleted from the bill, it seems safe to say that the WCSC benefit recommend­

ations would have moderately reduced benefit costs when compared to the previous

statute. Without the 2QO% maximum, the WCSC reconunendations would have

effected a significant reduction. The benefit provisions in the final

legislation, in contrast, involved a moderate increase in benefit costs.

For two years prior to enactment of the 1979 law there had

been a sustained clamor over the rising cost of workers' compensation,

focusing on the decidedly unpopular practice of "double-dipping". Workers'

compensation costs were also a significant component of the "business climate"

Page 21

issue in the 1978 elections and a number of legislators who were expected to

favor benefit stabilization were elected in that year. Benefits, in fact, have

been increasing steadily since 1973. The most comprehensive study of Minnesota's

workers' compensation system since the 1920's had offered the conclusion that

some benefits should be reduced. If ever there had been a time in which a

reduction in workers' compensation benefits seemed likely it was in the

1979 legislative session. Nonetheless, few of those reductions materialized

and several new increases did. A more appropriate moment for benefit "reform"

will not reappear for some time. This suggests that the old legislative maxim -

things previously granted are never taken away - still controls when workers'

compensation issues are concerend, and that it is likely to control for a

considerable time to come.

Despite the debacle suffered by proponents of benefit "reform",

there are signs of a decrease in the rate of premium. increases. The current

Rating Association rate increase proposal, for example, is 28.6% as compared

to the 67.5% increase sought in 1978.194 The source of this moderation in

the upward pressure on workers' compensation costs is to be found in several

of the non-benefit provisions of the new legislation.

The rehabilitation and retraining system recommended by the

WCSC, in contrast to the benefit reconrrnendations, was adopted with few

alterations by the Legislature. 195 The WCSC retraining and rehabilitation

proposals were the central item in the employers' program for workers'

compensation reform. These proposals increased employer initiative and

control over the retraining process and diminished the role of the state

Division of Vocational Rehabilitation, which employers disliked, in favor of

private providers. The WCSC recommendations were designed to increase the

Page 22

quality of retraining services and to increase incentives for realistic

retraining, especially on-the-job programs, and for returning to work. The

legislation retained these characteristics, but enhanced the employee's

role in the selection of a rehabilitation provider and the development of

the plan, increased the latitude for economic mobility through rehabilitation,

and lessened the stress placed upon on-the-job training.196 The retraining

benefit was also increased from 115% to 125% of temporary total benefits in

the legislation.197 Rehabilitation, despite these changes, was the one area

in which employers achieved more or less what they had hoped for. It seems

likely that the changes in this area will have the effect of reducing costs

through more effective training, reduced employee dissatisfaction, and a

speedier return to work.

The Reopened Case Fund198 and the Reinsurance Association199

are another likely source of decreased premium pressure. Though these pro­

visions will have no effect on workers' compensation claims, they obviate

the need for insurers to anticipate workers' compensation claim payments as

far into the future as they otherwise would have to do. Rather than each

insurer providing for every possible catastrophe and assuming the worst

future development of every claim, these two funds allocate the actual current

cost of catastrophes and long-term claims. 200 The result, even considering

the assessments of the funds themselves, should be lower overall costs.

The same result should be felt from the shift of liability from the insurer

to the Special Fund for many preexisting injuries.201

The miscellany of administrative changes incorporated in the 1979

law will also have a beneficial effect on worker's compensation costs.

Better information and recordkeeping and speedier claims service have lessened

litigation and reduced costs in other states and should do the same in

Page 23

Minnesota. 202 The objective scheduling of most disabilities should reduce

both litigation and unnecessary benefit payments. 203

The medical provisions of the new law are not easy to assess in

terms of cost. Second-surgical opinions, however, have generally reduced

surgical incidence.204 In the workers' compensation context, this would cause

a reduction in both medical and benefit payments. The option of neutral

medical opinions may also help to moderate unrealistic disability assessments

and thus reduce costs.

The many changes in the rate-making process and the regulatory

powers of the Commissioner of Insurance will have no direct effect on actual

workers' compensation costs. But to the degree that more participation by

employers and more power in the Commissioner makes it less likely that increases

will be approved except when absolutely necessary, the changes may assist in

moderating increases. 205 Many new provisions have the effect of allocating

the existing costs in a perhaps more equitable and efficient fashion, even

when costs are not actually reduced. 206 The additional information required

of insurers and the requirement that investment income be considered in

rate making could also result in more rational rate decisions. 207 The

statutory provisions that govern expansion of the option of self-insurance

and which permit price competition among insurers also may generate competitive

expense reductions by insurers themselves. 208 Among the most difficult

effects of the 1979 Act to assess are the political repercussions of the

extended debate on the workers' compensation issue. The two and one-half

year inquiry into the sources of high premiums, slow services, "liberal"

decisions, benefit abuses, lack of competition, and excessive profits will

Page 24

certainly have a sobering effect on the participants in the workers' compen­

sation system, which may tend to reduce costs apart from the objective

impact of the new rules themselves.

VI. CONCLUSION

The 1979 Workers' Compensation Act may be regarded as an attempt

to reduce the costs of the workers' compensation system through nearly every

means except reduction of benefits or major structural changes in the workers'

compensation delivery system. There is no doubt that there is considerable

fat in any mandatory 500 million dollar system administered by governmental

agencies and by private insurers who are relatively insulated from competition.

The changes adopted by the 1979 Minnesota Legislature were carefully considered

and they address most of the areas in the workers' compensation system in

which these unnecessary costs can be found. Thus, there is cause for moderate

optimism that cost pressure will abate in the immediate future because of the

legislation. But there is a limited amount of superfluous administrative

expense in the workers' compensation system. These types of reductions can

only go so far, and probably not much further than is provided in the new

law. If the current rate proposal is any indication, costs will continue to

rise, though at a less fearsome rate. It therefore seems inevitable that the

deferred issues of what types and amounts of compensation should be provided

through workers' compensation, and whether more competition should be intro­

duced by ending rate regulation or creating a new state workers' compensation

fund, will emerge again once the cost-saving potential of these administrative

reforms is exhausted.

Page 25

FOOTNOTES

1. See Act of June 7, 1979, ch. 3, 1979 Minn. Laws. Ex. Sess. 1256 (codified in scattered sections of Minn. Stat. ch. 176 (Supp. 1979). Minnesota's original workers' compensation law was Act of Apr. 24, 1913, ch 467, 1913 Minn. Laws 675 (current version at Minn. Stat. §§176.011-82 (1978 & Supp. 1979), as amended by Act of Mar. 28, 1980, ch. 384, §2, 1980 Minn. Sess. Law Serv. 100, 100 (West), as amended by Act of Mar. 28, 1980, ch. 385, 1980 Minn. Sess. Law Serv. 102 (West), as amended by Act of March 28, 1980, ch. 389, 1980 Minn. Sess. Law Serv. 104 (West), as amended by Act of March 28, 1980, ch. 392, 1980 Minn. Sess. Law Serv. 107 (West), as amended by Act of March 31, 1980, ch. 414, §2, 1980 Minn. Sess. Law Serv. 130, 130 (West), as amended by Act of Apr. 11, 1980, ch. 556, §12, 1980 Minn. Sess. Law Serv. 715, 721 (West), though an earlier act had modified connnon-law rules with respect to railroad employees. See Act of Feb. 24, 1887, ch. 13, 1887 Minn. Laws 69 (current version at Minn. Stat. §219.53 (1978). Significant changes in the law were made in 1921, see Act of Mar. 14, 1921, ch. 82, 1921 Minn. Laws 90 (codified in scattered sections of Minn. Stat. ch 176 (1978), in 1937, see Act of Mar. 12, 1937, ch. 64, 1937 Minn. Laws 109 (codified in scattered sections of Minn. Stat. ch. 176 (1978), and in 1953, see Act of Apr. 24, 1953, ch. 755, 1953 Minn. Laws 1099 (codified in scattered sections of Minn. Stat. ch. 176 (1978).

2. Act of June 7, 1979, ch. 3, 1979 Minn. Laws Ex. Sess. 1256 (codified in scattered sections of Minn. Stat. ch. 176 (supp. 1979) was derived from the companion bills, H.F. 946, 71st Minn. Legis. 1979 Sess. [hereinafter cited as H.F. 946] and S.F. 917, 71st Minn. Legis. 1979 Sess. [hereinafter cited as S.F. 917], wmich were introduced in both chambers soon after the Workers' Compensation Study Commission recommendations were issued. This legislation, amended in House and Senate Committees and further amended by the Joint Conference Committee, passed the Senate just minutes before the midnight adjournment hour on May 21, 1979, see Minn. S. Jour. 3555 (1979), but failed to come to a vote in the House before adjournment was required. S.F. 1, 71st Minn. Legis., 1979 Ex. Sess. was identical, except for minor technical adjustments, to the conference committee report of S.F. 917 and was passed under a suspension of rules by both houses without amendment on May 24, 1979. See Minn. S. Jour. 3590 (1979); Minn. H.R. Jour. 27-28 (Ex. Sess. 1979). The 57 recommend­ations of the Study Commission, the complete Study Commission report, an abbreviated report, and a summary of chapter 3 are available from the House Research Department. The reports, together with the session tapes and copies of all testimony, materials received, and staff reports are also on deposit with the Legislative Reference Library.

Page 26

3. The employees expressly excluded from the workers' compensation law are those covered by the FELA, owner-officers of family farms and their employees, Minnesota Historical Society Volunteers, some veterans' organization delegates, some domestic workers, and some employees of non-profit associations. Included at their option are officers of closely held corporations, partners, sole owners, and family farm corporation executives. See Minn. Stat. § 176.041(1) (Supp. 1979).

4. The 1937 legislation finally removed the employer's option to elect common-law tort liability, making the workers' compensation system entirely mandatory. See Act of Mar. 12, 1937, ch. 64 § 1, 1937 Minn. Laws, 109, 109 (current version at Minn. Stat. § 176.031 (1978)).

5. See Act of June 7, 1979, ch. 3 §§ 36, 70, 1979 Minn. Laws Ex. Sess. 1256, 1278, 1297 (codified at Minn. Stat. § 176.102 (Supp. 1979)).

6. See id. §§ 17-25, 1979 Minn. Laws Ex. Sess. at 1262 (Reinsurance Association) (codified at Minn. Stat§§ 79.34-.42 (Supp. 1979); id§ 43, 1979 Minn. Laws Ex. Sess. at 1285 (Reopened Case Fund) (codified at Minn. Stat. § 176.134 (Supp. 1979)).

7. See id. §67, 1979 Minn. Laws Ex. Sess. at 1296 (not codified). This second study commission has recommended the creation of a state workers' compensation fund and the deregulation of workers' compensation premium rates, MINNESOTA WORKERS' COMPENSATION STATE FUND STUDY COMMISSION, A REPORT TO THE MINNESOTA LEGISLATURE AND GOVERNOR 3-7 (-1980).

8. See id. §§1-16, 1979 Minn. Laws Ex. Sess. at 1256 (codified in scattered sections of Minn. Stat. ch. 79 (Supp. 1979)).

9. See id. §50, 1979 Minn. Laws Ex. Sess. at 1287 (codified at Minn. Stat. §176.181 (2) (Supp. 1979).

10. See, e.g., id. §34, 1979 Minn. Laws Ex. Sess. at 1273 (establishing a new permanent partial disability schedule) (codified at Minn. Stat. §176.101(3) (Supp. 1979)); id. §44, 1979 Minn. Laws Ex. Sess. at 1285 (requiring employer to furnish surgical treatment after employee has obtained two surgical opinions, one of which states that surgery is reasonably required) (codified at Minn. Stat §176.135(1) (a) (Supp. 1979)).

11. Though the entire Act affects workers' compensation practitioners, a number of changes have particular significance for attorneys. These include new provisions on co-employee liability, id§ 31, 1979 Minn. Laws Ex. Sess. at 1272 (codified at Minn. Stat. § 176.061(5) (Supp. 1979)), a change in the size and possibly the direction of the Workers' Compensation Court of Appeals, see id. §§ 26-27, 1979 Minne Laws Exe Sess. at 1268 (codified at Minn. Stat. §§ 175.006-008 (Supp. 1979)), prospective disability schedules for internal organ and certain other 1nJuries, id. §§ 34, 62, 1979 Minn. Laws Ex. Sess. at 1273, 1295 (codified at Minn. Stat. §§ 176.101(3), .ID05 (Supp. 1979)), more liberal rules for employer registration of preexisting impairments, id§ 39, 1979 Minn. Laws Ex. Sess. at 1282 (amending Minn. Stat. § 176.131 (3) (1978),,

Page 27

a conclusive presumption of dependency for both spous_es ~ id §37, 1979 Minn. Laws Ex. Sess. at 1281 (codified at Minn. Stat. § 176.111(1) (Supp. 1979)), an increase to age twenty-five for student dependency, id., new notice provisions, id. §§ 46-47, 57-58, 1979 Minn. Laws Ex. Sess. at 1286, 1293 (amending Minn. Stat. §§ 176.141, .241, .271 (1978), adding Minn. Stat. § 176.139 (Supp. 1979)), permissible recovery of mistaken payments, id. § 49, 1979 Minn. Laws Ex. Sess. at 1287 (amending Minn. Stat. § 176.179 (1978)), authority for a workers' compensation judge to consider workers' compensation expertise in determining attorneys' fees, id. § 32, 1979 Minn. Laws Ex. Sess. at 1272 (amending Minn. Stat. § 176.081(5) (1978)), several provisions requiring immediate benefit payment with liability and indemnification determinations to be made later, id. § 52, 1979 Minn. Laws Ex. Sess. at 1290 (amending Minn. Stat. § 176.191 (1978)), new penalties for failure to make medical or retraining-related payments, id. § 53, 1979 Minn. Laws Ex. Sess. at 1291 (amending Minn. Stat. § 176.221 (1978)), a more limited right to discontinue benefits, id. § 57, 1979 Minn. Laws Ex. Sess. at 1293 (amending Minn. Stat. § 176.241 (1978)), and installment payments of permanent partial disability benefits, id§ 30, 1979 Minn. Laws Ex. Sess. at 1271 (amending Minn. Stat. § 176.021(3) (1978)).

Other legislation during the 1979 session provided that a settlement among parties, all of whom are represented by counsel, will be presumed reasonable, see Act of May 30, 1979, ch. 271 § 1, 1979 Minn. Laws 591, 592 (amending Minn. Stat. & 176.521(2) (1978)), required insurers to provide employers with information about the effect of merit and experience plans on their premiums, id. § 2, 1979 Minn. Laws at 592 (amending Minn. Stat. § 79.21 (1978)), changed rules on transferee employees' rights, Act of Apr. 3, 1979, ch. 15 § 1, 1979 Minn. Laws 15, 15 (amending Minn. Stat. § 176.041(2) (1978)), modified the provision for optional workers' compensation coverage for officers of closely held corporations and partners, Act of May 7, 1979, ch. 74, § 1, 1979 Minn. Laws 106,106 (amending Minn. Stat. § 176.012 (1978)) (amended 1980); Act of May 17, 1979, ch. 92, § 3, 1979 Minn. Laws 130, 131 (amending Minn. Stat. §176.012 (1978)) (amended 1980), imppsed liability for employer's workers' compensation premium increases on third parties responsible for employees' injuries, Act of May 14, 1979, ch.81, § 1, 1979 Minn. Laws 113,114 (current version at Minn. Stat. § 176.061(5) (Supp. 1979)), and required payments for pediatric treatment, Act of May 21, 1979, ch. 107, § 1, 1979 Minn. Laws 149, 149 (amending Minn. Stat. § 176.135(1) (Supp. 1979)).

12. See Act of May 27, 1977, ch. 342 § 27, 1977 Minn. Laws 697, 714 (not codified).

13. The Workers' Compensation Study Connnission [hereinafter cited as WCSC] was charged to study and report to the Governor and the Legislature upon the procedures by which the workers' compensation premium rates were est~blished, comparative premium levels in Minnesota and in other states,

Page 28

methods of providing workers' compensation coverage in other states, and the administration of the Minnesota law by the Department of Labor and Industry and the Workers' Compensation Court of Appeals. Id.

14. See generally MINNESOTA WORKERS' COMPENSATION STUDY COMMISSION, A REPORT TO THE MINNESOTA LEGISLATURE AND GOVERNOR 164-76 (1979) [hereinafter cited as STUDY COMM'N].

The escalation of workers' compensation costs from 1974 to 1978 changed Minnesota's relative position among the states from 21st to 14th in the average workers' compensation premium. The average premium increased from $1.65 per each $100 of payroll to $2.83 during that period, an increase of 48%. See id. at 165. Fourteen other states had even more dramatic increases, including five whose average premium more than doubled. See id. This fact, however, was of very little comfort to Minnesota employers, who were inclinea to compare the state with its immediate neigh­bors. In this comparison Minnesota fared rather badly.

Wisconsin's average premium in 1978 was $1.44, up from $1.05 in 1974. See id; But that state's 1978 average rate was still only 50% of Minnesota's. Minnesota's competitive disadvantage with its neighboring states could not be explained by a higher accident rate, either. Wisconsin, for example, had a higher frequency of industrial accidents than did Minnesota during this period. The average accident in Minnesota, however, cost 68% more in benefits and medical expenses than the average Wisconsin accident. See id. at 173.

Iowa's premiums had increased even more dramatically, from $1.10 to $2.72, just 11 cents under Minnesota's rate. See id. at 165. The Dakotas, however, were much lower than Minnesota. North Dakota's rates were $1.31 in- 1974 and $1.80 in 1978 while South Dakota's were $1.15 and $1.43, increases of 37% and 24% respectively. See id. The increase in the average premium, however, was only part of the cost problem. The actual workers' compensation insurance premium for a business is based upon the size and type of business and the company's accident experience over the previous few years. See id.at 141-54. The smallest businesses are not eligible for the "premium discount", as it is called, nor for the "experience-rating" system. Thus, ·smaller businesses, already at a disadvantage in competition with larger firms, were often saddled with higher workers' compensation premiums as well. The lowest annual premium payment qualifying a firm for a premium discount is $1,000 and the discount has varied from 9.4% at that level to 16.3% for premiums above $100,000. See id. at 71. Experience rating, increasing or decreasing a premium based upon actual accident experience, is available only to those with premiums over $750 and the decreases are partially subsidized by those with lower premiums. See id. at 152-54.

Page 29

15. These cost increases, with their variable but uniformly disturbing impact on employers, followed in the wake of significant legislative changes during the same period. These changes commenced in 1971 and accelerated with the shift in the political balance in the Legislature in 1973. In that year, the Democratic Farmer Labor Party held the majority of seats in both chambers for the first time in history.

In 1971 there were increases in all types of workers' compensation benefits, as well as increases in the maximum benefit for survivors. See Act of May 22, 1971, ch. 475, 1971 Minn. Laws 829 (current version at Minn. Stat. §§ 176.101, .111 (1978 & Supp. 1979)). In addition, the Legislature created a higher supplementary benefit for older claims than the standard formula would otherwise provide. See Act of May 18, 1971, ch. 383, 1971 Minn Laws 643 (current version at Minn. Stat. § 176.132 (1978 & Supp. 1979), as amended by Act of March 28, 1980, ch. 389, 1980 Minn. Sess. Law Serv. 104 (West)). Employers' contributions to the Special Fund were also increased severalfold, while the Special Fund's liability for benefits due to a second work-related injury was postponed to a full year after the employer's first payment on the second claim instead of the previous 26 weeks. See Act of May 27, 1971, ch. 589, 1971 Minn. Laws 1094 (current version at Minn. Stat.§ 176.131(1)-(2), (4), (8) (1978 & Supp. 1979)); Act of May 27, 1971, ch. 593, 1971 Minn. Laws 1099 (current version at Minn. Stat. § 176.131(10) (Supp. 1979)). The pattern of benefit increases and erosion of the statute of limitations on claims, notice requirements, coverage limits, and employer defenses continued through 1978.

All workers' compensation benefits again were increased by the 1973 Legislature, which also created an additional benefit for peace officers killed in the line of duty. See Act of May 15, 1973, ch. 248, 1973 Minn. Laws 488 (current version at Minn. Stat. §§ 352E.0l-.045 (1978 & Supp. 1979)). The provisions that had limited liability for occupational diseases were repealed. See Act of May 24, 1973, ch. 643 § 11, 1973 Minn. Laws 1584, 1594 (current version at Minn. Stat. § 176.66 (1978)). Permanent partial disability benefits were also provided, for the first time, for injuries to internal organs, see Act of May 23, 1973, ch. 600, 1973 Minn. Laws 1398 (current version at Minn. Stat. § 176.101(3) (Supp. 1979)), and a special statute of limitations provision was ex­tended to occupational diseases. See Act of May 24, 1973, ch. 643 § 10, 1973 Minn. Laws 1584, 1593 (current version at Minn. Stat. § 176.151(4) (1978)). The only 1973 legislation likely to reduce costs was a new provision establishing a maximum for workers' compensation and social security disability benefits in combination. See id. § 7, 1973 Minn. Laws at 1591 (current version at Minn. Stat. & 176.111(21) (1978)).

In 1974 the Legislature increased supplementary benefits once more. See Act of Apr. 10, 1974, ch 431, 1974 Minn. Laws 919 (current version at Minn. Stat. § 176.132 (1978 & Supp. 1979), as amended by Act of Mar. 28, 1980, ch. 389, 1980 Minn. Sess. Law Serv. 104 (West)). In addition, new

Page 30

legislation responding to the Minnesota Supreme Court's decisions in Boquist v. Dayton-Hudson Corp., 297 Minn. 14, 209 N.W.2d 783 (1973) and Pramschiefer v. Windom Hospital, 297 Minn. 212,211 N.W.2d 365 (1973) (per curiam), established that temporary total benefits could be received concurrently with permanent partial benefits, and further required the latter to be paid in a lump sum as soon as ascertainable. The court in Boquist had held that since permanent partial and permanent total benefits were both designed to replace lost earnings, they could not be received concurrently. See 297 Minn. at 18, 209 N.W.2d at 785. Pramschiefer extended this same reasoning to concurrent receipt of temporary total and permanent partial benefits. See 297 Minn. at 215, 211 N.W.2d at 368. The issues presented by these two cases did not arise until Mechling v. Jasper Stone Co., 293 Minn. 309, 198 N.W.2d 561 (1972). Prior to that case an employee whose disability persisted longer than two years was forced to elect either permanent partial benefits or temporary total benefits, since only two years of temporary total healing period benefits could be received in addition to permanent partial benefits, while 350 weeks of temporary total benefits were payable when no permanent partial benefits were claimed. The court in Mechling determined that the statutory sections providing temporary total and permanent partial benefits were to be read as separate and distinct entitlements, so that both forms of benefits could be received. See id. at 317-18, 198 N.W.2d at 566. The court was unwilling, however, to allow these benefits to be received at the same time in the absence of legislative intent to that effect. See id. at 314-15, 198 N.W.2d at 564. The 1974 Legislature provided that language. See Act of Apr. 12, 1974, ch. 486, §1, 1974 Minn. Laws 1230, 1231 (current version at Minn. Stat. § 176.021(3) (Supp. 1979)). Burns were also newly scheduled for permanent partial benefits and insurer recovery for mistaken benefit payments was denied. See id§§ 3, 5, 1974 Minn. Laws at 1232, 1237 (current version at Minn. Stat. §§ 176.101, subd. 3(48), .179 (Supp. 1979)).

The 1975 Legislature continued this trend favoring more liberal benefits and fewer limits on liability. The fixed maximums for death benefits, temporary total benefits, and temporary partial benefits were removed and those for permanent partial and permanent total benefits were increased. See Act of June 4, 1975, ch. 359, §§ 8, 15, 1975 Minn. Laws 1168, 1174, 1182 (current version at Minn. Stat. §§ 176.101, .111(20) (1978 & Supp. 1979)). For the first time, a percentage adjustment of benefits to compensate for inflation was introduced. See id. § 20, 1975 Minn. Laws at 1188 (current version at Minn. Stat. & 176.645 (1978)). Minimum payments were also increased for temporary total and permanent total benefits. See id.§ 8, 1975 Minn. Laws at 1174 (current version at Minn. Stat. § 176.101(1), (4) (Supp. 1979)). Minor survivors' benefits were increased, see id. § 14, 1975 Minn. Laws at 1182 (codified at Minn. Stat. & 176.111(12) (1978)), as were supplementary benefits, see id. § 18, 1975 Minn. Laws at 1185 (current version at Minn. Stat. §176.132(2) (Supp. 1979)). Scarring was newly scheduled for permanent

Page 31

partial payments. See id. § 8, 1975 Minn. Laws 1174 (current version at Minn. Stat. & 176.101, subd. 3(41) (Supp. 1979)). The statute of limitations for reopening or rehearing a claim was abolished too, and those for initial claims and for notice of injury were extended. See id. § 17, 1975 Minn. Laws at 1186 (current version at Minn. Stat. § 176.151 (1978)).

In 1976 the national guard was given workers' compensation coverage. See Act of Apr. 20, 1976, ch. 331, § 36, 1976 Minn. Laws 1282, 1299 (codified at Minn. Stat. § 176.011, subd. 9(11) (Supp. 1979)).

The following year, the Legislature amended the inflation adjustment provisions so that benefits could be increased for inflation beyond the statutory benefit maximums in effect at the time of the injury. See Act of May 27, 1977, ch. 342. § 23, 1977 Minn. Laws 697, 712 (codified at Minn. Stat. § 176.645 (1978)). The time period for notice of injury was doubled to 180 days. See id. § 19, 1977 Minn. Laws at 711 (current version at Minn. Stat. § 176.141 (Supp. 1979)). The year 1977 also saw the continuation and expansion of new exclusions from coverage for certain family farm and closely held corporation employees, see id§ 5, 1977 Minn. Laws at 700 (current version at Minn. Stat. § 176.041(1) (Supp. 1979)), and the enactment of a limit on annual increases in workers' compensation rates. See-id. § 25, 1977 Minn. Laws at 713 (repealed 1978.)

In 1978, however, the rate increase limit was repealed. See Act of Apr. 7, 1978, ch. 797, § 1, 1978 Minn. Laws 1245, 1245. Instead, the Administra­tive Procedure Act was extended to the workers' compensation rate-making process in the hope that additional procedural requirements would assure lower rates. See id. (codified at Minn. Stat. § 79.071 (Supp. 1979)). Several other classes of employees were also added to workers' compensation coverage by statute in 1978. See Act of Mar. 28, 1978, ch. 702, 1978 Minn. Laws 614 (amending Minn. Stat. § 176.011(9) (Supp. 1977) (amended 1979, 1980). Smaller employers in the same industry were given the option of self-insuring for workers' compensation liability through trade associations or other joint efforts. See Act of Apr. 7, 1978, ch. 797, § 4, 1978 Minn. Laws 1245, 1247 (current version at Minn. Stat. §176.181(2) (Supp. 1979)). Coverage for executive officers of closely held corporations also was made optional in 1978. See Act of Apr. 5, 1978, ch. 757, § 2, 1978 Minn. Laws 925, 926 (amending Minn. Stat. § 176.012 (Supp. 1977) (amended 1979, 1980). The supplementary benefit was reduced by five percent in the expectation of a social security increase covering the same individuals. See Act of Apr. 7, 1978, ch. 797, § 3, 1978 Minn. Laws 1245, 1246 (current version at Minn. Stat. § 176.132(2) (Supp. 1979)).

16. See STUDY COMM'N, supra note 14, at 136-64, 169-91.

17. For a comparative analysis of self-insurance in Minnesota and in other states, see id. at 245-72. For material on state funds in workers' compensation, see id. at 273-95.

Page 32

18. See id. at 132-135, 199-213.

19. For a study of the effect of extensive litigation on workers' compensation costs, see California Workers' Compensation Institute, Litigation in Workers' Compensation: A Report to the Industry (1977).

20. The essential recommendations of the National Commission on State Workers' Compensation Laws (hereinafter cited as NCSWCL) were reflected in the WCSC recommendations that surviving children who were full-time students receive benefits until age 25 (Recommendation 12) and that workers' compensation coverage for appointed and elected officials be mandatory (Recommendation 13). See STUDY COMM'N, supra note 14, at 21-22. The former was adopted in Act of June 7, 1979, ch. 3 § 37, 1979 Minn. Laws Ex. Sess. 1256, 1281 (codified at Minn. Stat. § 176.111(1), (Supp. 1979)).

The NCSWCL was created by President Nixon in 1971 in response to a congressional mandate for a study of the adequacy and uniformity of the state workers' compensation laws. See STUDY COMM'N, supra at 93. Tbe NCSWCL's final report, issued in July 1972, found the states' workers compensation laws neither adequate nor uniform and offered 84 recommendations for changes in the state statutes, 19 of them described as "Essential". See id. Senators Harrison Williams and Jacob Javits offered legislation that would rumpose these essential recommendations as mandatory federal standards for state laws, see id. at 93-94, on the pattern of the federal conformity requirements for state unemployment compensation statutes. See Federal Unemployment Tax Act. 26 U.S.C. §§3301-3311 (1976 & Supp. II 1978) (amended 1979, 1980). Although this proposed legislation has been controversial, the prospect of federal intervention has given the NCSWCL's "advisory" recommendations considerable force at the state level, see STUDY COMM'N, supra, at 94. Minnesota was in compliance with 10 of the 19 essential recommendations in 1972 and 13 1/2 at the time the WCSC first met. See id. Though far less significant as an impetus to the WCSC than the cost pressure felt by employers, the need to con­sider adoption of at least some of the NCSWCL recommendations was a factor in the initiation of this comprehensive study of Minnesota's workers' compensation law. See id. at 93-99.

21. The legislative appointees to the WCSC included Representatives Leo Adams, Dick Kaley, and Wayne Simoneau, and Senators Nancy Brataas, Steve Keefe, and Roger Laufenberger. The g u b er n at Or i a 1 a pp O i ~ t e es in C 1 u de d pat r i-c k New 1 in ~ -an -a C tu a ry with St. Paul Fire and Marine Insurance Company, Wendy

Page 33

Borsheim, President of the Minnesota Retail Merchants Association, Laurence Koll, a workers' compensation defense attorney, Neil Sherburne, former Secretary-Treasurer of the Minnesota AFL-CIO, C. Arthur Williams, Professor and former Dean of the University of Minnesota College of Business Administration, Nadine James, a workers' compensation judge, and W. Preston Shepard, Regional Vice President of Employers Insurance of Wausau. E. I. "Bud" Malone, then Commissioner of the Minnesota Department of Labor and Industry, and Tom ' O'Malley, Assistant Commissioner of the Insurance Division of the Minnesota Department of Commerce, also served as members of the WCSC. See STUDY COMM'N, supra note 14, at 2-6.

22. See id. at 7-15.

23. See STUDY COMM'N, supra note 14.

24. See id. at 68-92.

25. Professor Larson discusses compensation theories based upon an individual's needs, loss of earning capacity, social judgments placing the cost of work injuries on product consumers, and imposing strict liability upon employers. See 1 A. LARSON, THE LAW OF WORKMEN'S COMPENSATION§§ 2.20, 3.30 (1978). For an analysis of the origins of Minnesota's workers' compensation laws, see Asher, The Origins of Workmen's Compensation in Minnesota, 44 Minn. Hist. 142 (1974).

26. See, e.g., Statement of Harry Peterson, Vice President, Minne­sota Association of Commerce and Industry, before the Workers' Compensation Study Commission (Oct. 30, 1978).

27. See, e.g., Letter from John E. Diehl, Attorney, to Senator Steve Keefe (Feb. 8, 1978).

28. See, e.g., Statement of Abe Rosenthal, Executive Vice President, Minnesota Transport Service Association, before the Annual Convention of Minnesota Insurance Agents Association (Sept. 23, 1977).

29. See, e.g., Letter from Thomas C. Nobel, Lake Line Helicopters, Inc., to Senator Steve Keefe (Sept. 30, 1977).

30. See, e.g., Letter from John A. Cairns, Lobbyist for American Insurance Association, to Senator Steve Keefe (Sept. 9, 1977).

31. See generally S. Jackson & P. Hyduke, Second Opinion on Elective Surgical Procedures: A Background Document on Prospective Surgical Review (Minn. H.R. Research Dep't., 1978).

Page 34

32. See, e.g., Letter from Robert K. Severson, Attorney, to Senator Steve Keefe (Sept. 1, 1977).

33. For an explanation and analysis of these 13 recommendations, see STUDY COMM'N, supra note 14, at 16-22.

34. See id. at 16 (Recommendation 1).

35. See id. at 16-17 (Recommendation 2).

36. See id. at 17 (Recommendation 3).

37. See id. at 18 (Recommendation 6).

38. See id. at 17 (Recommendation 4).

39. See id. at 19-20 (Recommendation 8).

40. See id. at 20 (Recommendation 9).

41. See id. at 18-19 (Recommendation 7).

42. See id. at 17-18 (Recommendation 5).

43. See id. at 21-22 (Recommendation 12).

44. See id. at 22 (Recommendation 13).

45. See id. at 21 (Recommendation 11).

46. See id. at 20-21 (Recommendation 10).

47. See id. at 40-41 (Recommendation 40).

48. See id. at 49 (Recommendation 57).

49. See id. at 22-27 (Recommendation 14). The rehabilitation proposal came befo~e the WCSC after it was adopted by the Workers' Compensation Advisory Council, a permanent statutory body which monitors the workers' compensation system and offers its own periodic recommendations for statutory or other changes. See id. at 22.

50. For an explanation and analysis of these recommendations, see id. at 28-35 (Recommendations 15-28).

51. See id. at 30 (Recommendation 19).

52. See id. (Recommendation 20).

Page 35

53. See id. (Recommendation 21).

54. See id. at 41 (Recommendation 25).

55. See id. at 33 (Recommendation 25).

56. See id.

57. See id. at 33-34 (Recommendation 26).

58. See id. at 34-35 (Recommendation 28).

59. See id. at 35 (Recommendation 29), 44-45 (Recommendation 47).

60. See id. at 35 (Recommendation 29).

61. See id. at 44-45 (Recommendation 47).

62. See id. at 34.

63. See id. at 44.

64. See id. at 36-37 (Recommendations 30-33). For an analysis of the Special Fund, see Ehlmann, Minnesota's Second Injury Fund, 6 Wm. Mitchell L. Rev. - (1980).

65. See id. at 36 (Recommendation 30).

66. See id. (Recommendation 31).

67. See id. at 36-37 (Recommendation 32).

68. See id. at 37 (Recommendation 33).

69. See id. at 37-38 (Recommendations 34-36).

70. See id. (Recommendation 34).

71. See id. at 38 (Recommendation 35).

72. See id. (Recommendation 36).

73. See id. at 39-40 (Recommendations 37-39), 42-49 (Recommend-ations 42-57).

74. See id. at 39 (Recommendation 38).

75. See id. (Recommendation 37).

76. See id. at 42 (Recommendation 42).

77. See id. (Recommendation 43) J

78. See id. at 43 (Recommendation 45).

79. See id. at 47 (Recommendation 51).

8 0 . S e e id . ( Recommend at ion 5 0 ) .

81. See id. at 47-48 (Recommendation 52).

82. See id. at 48 (Recommendation 53-54).

83. See id. at 48-49 (Recommendation 55).

84. See id. at 49 (Recommendatiori 56).

85. See id. at 45-46 (Recommendation 48).

86. See id. at 46 (Recommendation 49).

87. See id at 43-44 (Recommendation 46).

88. See id. at 42-43 (Recommendation 44).

Page 36

89. See id. at 68-92 (Minority Recommendations 1-16).

90. See id. at 68-74 (Minority Recommendation 1).

91. See id. at 54-55 (Defeated Motion 9). The Workers' Compensation State Fund Study Commission, however, recently recommended the creation of such a fund, see id. §67, 1979 Minn. Laws Ex. Sess. at 1296 (not codified).

92. See id. at 75-78 (Minority Recommendation 2).

93. See id. at 78-80 (Minority Recommendation 3).

94. See id. at 82-83 (Minority Recommendation 5).

95. See id. at 80-81 (Minority Recommendation 4).

96. See id. at 90-91 (Minority Recommendation 15).

97. See id. at 89 (Minority Recommendation 10).

98. See id. at 83-84 (Minority Recommendation 6).

99. See id. at 85-86 (Minority Recommendation 8).

100.

101.

102.

103.

104.

105.

106.

107.

See

See

See

See

See

See

See

See

id.

id.

id.

id.

id.

id.

id.

id.

Page 37

at 86-88 (Minority Recommendation 9) .

at 85 (Minority Recommendation 7).

at 89 (Minority Recommendation 12) .

(Minority Recommendation 11) .

at 90 (Minority Recomr.iendation 11) .

(Minority Recommendation 14) .

at 92 (Minority Recommendation 14) .

at 50-55 (Defeated Motions 1-10).

108. See note 130 infra and accompanying text.

109. See STUDY C0MM'N, supra note 14, at 51-52 (Defeated Motion 3).

110. See id. at 53-54 (Defeated Motions 7-8). Fully competitive workers' compensation premium rates were, however, recently recommended by the Workers' Compensation State Fund Study Commission, see id. § 67, 1979 Minn. Laws. Ex. Sess. at 1296 (not codified).

111. See id. at 52 (Defeated Motion 4}.

112. See id. at 52-53 (Defeated Motion 5).

113. See id. at 1-15.

114. See Minn. S. Jour. 8 (Ex. Sess. 1979); Minn. H.R. Jour. 3677-78 (Ex. Sess. 1979).

115. See Letter from Minnesota Senate Counsel to Senate and House Conferees, at 10 (May 19, 1979).

116. See Act of June 7, 1979, ch. 3, § 67, 1979 Minn. Laws Ex. Sess., 1256, 1296 (not codified). The Senate proposal for state indemnity for workers' compensation liabilities of self-insuring political subdivisions, however, was a&iopted. See id.§ 51, 1979 Minn. Laws Ex. Sess·. at 1289 (codified at Minn. Stat. §176.181(5) (Supp. 1979)). The Workers' Compensation State Fund Study Commission has recently recommended the creation of such a fund, in addition to the deregulation of workers' compensation premium rates, see id. § 67, 1979 Minn. Laws. Ex. Sess. at 1296 (not codified).

Page 38

117. See id. §36(11), 1979 Minn. Laws Ex. Sess. at 1281 (codified at Minn. Stat. § 76.102(11) (Supp. 1979)). Compare S.F. 917, § 17(11), 71st Minn. Legis., 1979 Sess. with Minn. R.R. Jour. 2601, 2631 (1979).

118. See Act of June 7, 1979, ch. 3 §36(4)-(5), 1979 Minn. Laws Ex. Sess. 1256, 1279-80 (codified at Minn. Stat. § 176.102(4)-(5) (Supp. 1979)). Compare Minn. R.R. Jour. 2601, 2629-30 (1979) with S.F. 917 § 17(4)-(5), 71st Minn. Legis., 1979 Sess.

119. See Act of June 7, 1979, ch. 3 § 41, 1979 Minn. Laws. Ex. Sess. 1256, 1284 (codified at Minn. Stat. § 176.132(2) (Supp. 1979)); Minn. R.R. Jour. 2601, 2634-35 (1979) (House Amendment).

120. See Act of June 7, 1979, ch. 3, § 43, 1979 Minn. Laws Ex. Sess. 1256, 1285 (codified at Minn. Stat. § 176.134(2) (Supp. 1979)). Compare Minn. R.R. Jour. 2601, 2635-36 (1979) with S.F. 917 § 23, 71st Minn. LegisL, 1979 Sess.

121. See Act of June 7, 1979, ch. 3 § 53, 1979 Minn. Laws Ex. SP.i::;s. 1256, 1291 (codified at Minn. Stat. § 176.221 (Supp. 1979)); J1inn. ILR. Jour. 2601, __ 2641-43 (1979) (House Amendment).

122. See Act of June 7, 1979, ch. 3 § 57, 1979 Minn. Laws Ex. Sess. 1256, 1293 (codified at Minn. Stat.§ 176.241 (Supp. 1979)).

123. See id. § 26, 1979 Minn. Laws. Ex. Sess. at 1268 (codified at Minn. Stat. § 175.006(1) (Supp. 1979)).

124. Compare id. §§ 48, 59, 1979 Minn. Laws. Ex. Sess. at 1286, 1294 (codified at Minn. Stat. §§ 176.155(2), .391(2) (Supp. 1979) with S.F. 917 §§ 27, 34, 71st Minn. Legis. 1979 Sess. See generally STUDY COMM'N, supra note 14, at 37-38 (Recommendation 34).

125. See Act of June 7, 1979, ch. 3, § 10, 1979 Minn. Laws Ex. Sess. 1256, 1260 (codified at Minn. Stat. § 79.171 (Supp. 1979)).

126. See id. § 15, 1979 Minn. Laws Ex. Sess. at 1262 (codified at Minn. Stat. § 79.25(2) (Supp. 1979)).

127. See id. § 14, 1979 Minn. Laws Ex. Sess. at 1262 (codified at Minn. Stat. § 79.221 (Supp. 1979)).

Page 39

128. Compare id. §§ 17-25, 1979 Minn. Laws Ex. Sess. at 1262-67 (amended 1980) and Minn. H.R. Jour. 2609-15 (1979) with S.F. 917, §§ 36-45, 71st Minn. Legis., 1979 Sess.

129. Compare STUDY C0MM'N, supra note 14, at 16 (Recommendation 2) with Act of June 7, 1979, ch. 3 § 30, 1979 Minn. Laws Ex. Sess. 1256, 1271 (governing permanent partial benefits upon return to work) (codified at Minn. Stat. § 176.021(3) (Supp. 1979)); compare STUDY C0MM'N, supra note 14, at 20 (Recommendation 10) with Act of June 7, 1979, ch. 3, § 37, 1979 Minn. Laws Ex. Sess. 1256, 1281 (presumption of dependency for spouses rather than widows) (codified at Minn. Stat. § 176.111(1) (Supp. 1979)); compare STUDY C0MM'N supra note 14, at 33 (Recommendation 25) with Act of June 7, 1979, ch. 3, § 26, 1979 Minn. Laws Ex. Sess. 1256, 1268 (expanding Workers' Compensation Court of Appeals) (codified at Minn. Stat. § 175.066(1) (Supp. 1979)).

130. Compare STUDY C0MM'N supra note 14, at 80 (Minority Recom­mendation 4) with Act of June 7, 1979, ch. 3, §§ 33-35, 1979 Minn. Laws Ex. Sess. 1256, 1273-78 (retaining maximum disability benefit of 100% of state average weekly wage) (codified at Minn. Stat. § 176.101(1), (3)-(4) (Supp. 1979)); compare STUDY C0MM'N, supra note 14, at 92 (Minority Recommendation 16) with Act of June 7, 1979, ch. 3, § 12, 1979 Minn. Laws Ex. Sess. 1256, 1261 (excluding vacation, holiday, and sick leave wages from computation of insurance premiums) (codified at Minn. Stat. § 79.211(1) (Supp. 1979)); compare STUDY COMM'N, supra note 14, at 54 (Defeated Motion 8) (recommending that insurance rates be determined by open competition) with Act of June 7, 1979, ch. 3 § 11, 1979 Minn. Laws Ex. Sess. 1256, 1261 (permitting insurers to offer rates lower than those approved by Commissioner of Insurance) (codified at Minn. Stat. § 79.21 (Supp. 1979)). Fully competitive workers' compensation premium rates were, however, recently recommended by the Workers' Compensation State Fund Study Commission, see id. § 67, 1979 Minn. Laws. Ex. Sess. at 1296 (not codified).

131. Compare STUDY C0MM'N, supra note 14, at 68 (Minority Recommendation 1) (recommending establishment of competitive state insurance fund) with Act of June 7, 1979, ch. 3 § 67, 1979 Minn. Laws. Ex. Sess. 1256, 1296 (creating study commission to examine feasibility of state fund) (not codified). The Workers' Compensation State Fund Study Commission, however, recently recommended the creation of such a fund, see id. § 67, 1979 Minn. Laws Ex. Sess. at 1296 (not codified).

Page 40

132. Compare STUDY COMM'N, supra note 14, at 16-17 (Recommendation n·

with Act of June 7, 1979, ch. 3, § 30, 1979 Minn. Laws Ex. Sess. 1256, 1271 (codified at Minn. Stat. § 176.021(3) (Supp. 1979)).

133. Compare STUDY COMM'N, supra note 14, at 17 (Recommendation 3) with Act of June 7, 1979, ch. 3 § 33, 1979 Minn. Laws Ex. Sess. 1256, 1273 (codified at Minn. Stat. §176.101(1) (Supp. 1979)).

134. See STUDY COMM'N, supra note 14, at 17 (Recommendation 4).

135. See id. at 18-19 (Recommendation 7).

136. Compare id. at 20 (Recommendation 9) with Act of June 7, 1979, ch. 3, § 29, 1979 Minn. Laws Ex. Sess. 1256, 1270 (codified at Minn. Stat. § 176.011(5) (Supp. 1979)).

137. See STUDY COMM'N, supra note 14, at 20-21 (Recommendation 10).

138. See Act of June 7, 1979, ch. 3, § 37, 1979 Minn. Laws Ex. Sess. 1256, 1281 (codified at Minn. Stat. § 176.111(1) (Supp. 1979)).

139. See STUDY COMM'N, supra note 14, at 17-18 (Recommendation S).

140. See id. at 80-81 (Minority Recommendation 4).

141. See id. at 22 (Recommendation 13).

142. See Act of June 7, 1979, ch. 3 & 26, 1979 Minn. Laws Ex. Sess. 1256, 1268 (codified at Minn. Stat. § 175.006 (Supp. 1979)).

143. See STUDY COMM'N, supra note 14, at 33 (Recommendation 25).

144. See id.

145. See id. at 30-31 (Recommendation 20).

146. Cf. Act of June, 7, 1979, ch. 3, § 47, 1979 Minn. Laws Ex. Sess. 1256, 1286 (retaining notice provision of prior law) (codified at Minn. Stat. § 176.141 (Supp. 1979)).

147. See STUDY COMM'N, supra note 14, at 47 (Recommendation SO).

148. Compare id. at 92 (Minority Recommendation 16) with Act of June 7, 1979, ch. 3, § 12, 1979 Minn. Laws Ex. Sess. 1256, 1261 (codified at Minn. Stat.§ 79.211(1) (Supp. 1979)).

Page 41

149. Compare STUDY COMM'N, supra note 14, at 80-81 (Min0rity Recommendation 4) with, e.g. Act of June 7, 1979, ch. 3, § 33, 1979 Minn. Laws Ex. Sess. 1256, 1273 (codified at Minn. Stat.§ 176.101(1) (Supp. 1979)).

150. See Act of June 7, 1979, ch. 3 § 11, 1979 Minn. Laws Ex. Sess. 1256, 1261 (codified at Minn. Stat. § 79.21 (Supp.1979)).

151. See STUDY COMM'N, supra note 14, at 54 (Defeated Motion 8). The proposal was recently adopted by the Workers' Compensation State Fund Study Commission, see id. § 67, 1979 Minn. Laws. Ex. Sess. at 1296 (not codified).

152. See id. at 53 (Defeated Motion 7).

153. Compare id. at 18 (Recommendation 6) with Act of June 7, 1979, ch. 3, §49, 1979 Minn. Laws Ex. Sess. 1256, 1287 (codified at Minn. Stat. § 176.179 (Supp. 1979)).

154. Compare STUDY COMM'N, supra note 14, at 19-20 (Recommendation 8) with Act of June 7, 1979, ch. 3, § 34, 1979 Minn. Laws Ex. Sess. 1256, 1273 (codified at Minn. Stat. § 176.101, subd. 3(40) (Supp. 1979)).

155. Compare STUDY COMM'N, supra note 14, at 21-22 (Recommendation 12) with Act of June 7, 1979, ch. 3, § 37, 1979 Minn. Laws Ex. Sess. 1256, 1281 (codified at Minn. Stat. § 176.111(1) (Supp. 1979)).

156. Compare STUDY COMM'N, supra note 14, at 21 (Recommendation 11) with Act of June 7, 1979, ch. 3 § 30, 1979 Minn. Laws Ex. Sess. 1256, 1271 (codified at Minn. Stat. § 176.021(3) (Supp. 1979)).

157. Compare STUDY COMM'N, supra note 14, at 16 (Recommendation 1) (recommending payment of 115% of temporary total disability benefits in lieu of compensation during retraining) with Act of June 7, 1979, ch. 3, § 36, 1979 Minn. Laws Ex. Sess. 1256, 1278 (providing payment equal to 125% of temporary total disability benefits in lieu of compensation during retraining) (codified at Minn. Stat. § 176.102(11) (Supp. 1979)).

158. Compare STUDY COMM'N, supra note 14, at 20-21 (Recommendation 10) with Act of June 7, 1979, ch. 3, § 37, 1979 Minn~ Laws Ex. Sess. 1256, 1281 (Act removed offset for spousal income) (codified at Minn. Stat. § 176.111(1) (Supp. 1979)).

Page 42

159. Compare STUDY C0MM'N, supra note 14, at 16-17 (Recommendation 2) with Act of June 7, 1979, ch. 3, § 30, 1979 Minn. Laws Ex. Sess., 1256, 1271 (Act removed offset for spousal income) (codified at Minn. Stat. § 176.021(3) (Supp. 1979)).

160. Compare STUDY C0MM'N, supra note 14, at 22-27 (Recommendation 14) with Act of June 7, 1979, ch. 3, § 36, 1979 Minn. Laws Ex. Sess. 1256, 1278 (codified at Minn. Stat. § 176.102 (Supp. 1979)).

161. Compare STUDY C0MM'N, supra note 14, at 34-35 (Recommendation 28) with Act of June 7, 1979, ch. 3, § 32, 1979 Minn. Laws Ex. Sess. 1256, 1272 (codified at Minn. Stat. § 176.081(5) (Supp. 1979)).

162. Compare STUDY C0MM'N, supra note 14, at 28-29 (Recommendation 16) with Act of June 7, 1979, ch. 3, § 45, 1979 Minn. Laws Ex. Sess. 1256, 1286 (codified at Minn. Stat. § 176, 136 (Supp. 1979)).

163. Compare STUDY C0MM'N, supra note 14, at 35 (Recommendation 29) with Act of June 7, 1979, ch. 3, § 43, 1979 Minn. Laws Ex. Sess 1256, 1285 (codified at Minn. Stat. § 176.134 (Supp. 1979)).

164. Compare STUDY C0MM'N, supra note 14, at 44-45 (Recommendation 47) with Act of June 7, 1979, ch. 3, §§ 17-25, 1979 Minn. Laws Ex. Sess. 1256, 1262-67 (codified at Minn. Stat. §§ 79. 34-. 42 (Supp. 1979) (amended 1980)D.

165. Compare STUDY C0MM'N, supra note 14, at 36-37 (Recommendation 32) with Act of June 7, 1979, ch. 3, § 38, 1979 Minn. Laws Ex. Sess. 1256, 1282 (codified at Minn. Stat. § 167.131(l)(a), (Supp. 1979)).

166. Compare STUDY C0MM'N, supra note 14, at 36 (Recommendation 30) with Act of June 7, 1979, ch. 3, § 39, 1979 Minn. Laws Ex. Sess. 1256, 1282 (codified at Minn. Stat. § 176.131(3) (Supp. 1979)).

167. Compare STUDY C0MM'N, supra note 14, at 37 (Recommendation 33) with Act of June 7, 1979, ch. 3, § 52, 1979 Minn. Laws Ex. Sess. 1256, 1290 (codified at Minn. Stat. § 176.191(2) (Supp. 1979)).

168. Compare STUDY C0MM'N, supra note 14, at 36 (Recommendation 31) with Act of June 7, 1979, ch. 3. § 40, 1979 Minn. Laws Ex. Sess. 1256, 1282 (amending Minn. Stat. & 176.131(10) (1978)).

169. Compare STUDY C0MM'N, supra note 14, at 37-38 (Recommendation 34) with Act of June 7, 1979, ch. 3. § 48, 1979 Minn. Laws Ex. Sess. 1256, 1286 (codified at Minn. Stat. § 176.155(2) (Supp. 1979)).

170. Compare STUDY C0MM'N, supra note 14, at 38 (Recommendation 35) with Act of June 7, 1979, ch. 3, § 44, 1979 Minn. Laws Ex. Sess. 1256, 1285 (codified at Minn. Stat. § 176.135(1)(a) (Supp. 1979)).

Page 43

171. Compare STUDY C0MM'N, supra note 14, at 38 (Recommendation 36) with Act of June 7, 1979, ch. 3, § 52, 1979 Minn. Laws Ex. Sess. 1256, 1290 (codified at Minn. Stat. & 176.191(3) (Supp. 1979)).

172. Compare STUDY C0MM'N, supra note 14, at 40-41 (Recolillilendation 40) with Act of June 7, 1979, ch. 3, § 31, 1979 Minn. Laws Ex. Sess. 1256, 1272 (codified at Minn. Stat. § 176.061(5) (Supp. 1979)).

173. Compare STUDY C0MM'N, supra ~ote 14, at 42-43 (Recommendations 43-44) with Act of June 7, 1979, ch. 3, § 6, 1979 Minn. Laws Ex. Sess. 1256, 1259 (codified at Minn. Stat. § 79.075 (Supp. 1979)).

174. See note 173 supra.

175. Compare STUDY C0MM'N, supra note 14, at 43 (Recommendations 43-44) with Act of June 7, 1979, ch. 3, § 12, 1979 Minn. Laws Ex. Sess. 1256, 1261 (codified at Minn. Stat. § 79.211(2) (Supp. 1979) (amended 1980)).

176. Compare STUDY C0MM'N, supra note 14, at 47-48 (Recommendation 45) with Act of June 7, 1979, ch. 3, § 16, 1979 Minn. Laws Ex. Sess. 1256, 1262 (codified at Minn. Stat. § 79.33 (Supp. 1979)).

177. Compare STUDY C0MM'N, supra note 14, at 48 (Recommendations 53-54) with Act of June 7, 1979, ch. 3, § 10, 1979 Minn. Laws Ex. Sess. 1256, 1260 (codified at Minn. Stat. § 79.171 (Supp. 1979)).

178. Compare STUDY COMM'N, supra note 14, at 49 (Recommendation 56) with Act of June 7, 1979, ch. 3 § 10, 1979 Minn. Laws Ex. Sess. 1256, 1260 (codified at Minn. Stat. 79.171 (Supp. 1979)).

179. Compare STUDY COMM'N, supra note 14, at 45-46 (Reconnnendation 48) with Act of June 7, 1979, ch. 3, § 15, 1979 Minn. Laws Ex. Sess. 1256, 1262 (codified at Minn. Stat.§ 79.25(2) (Supp. 1979)).

180. Compare STUDY C0MM'N, supra note 14, at 47 (Recommendation 51) with Act of June 7, 1979, ch. 3, § 16, 1979 Minn. Laws Ex. Sess. 1256, 1262 (codified at Minn. Stat. § 79.33 (Supp. 1979)).

181. Compare STUDY C0MM'N, supra note 14, at 46 (Recommendation 49) with Act of June 77, 1979, ch. 3, §§ 2-4, 1979 Minn. Laws Ex. Sess. 1256, 1256-58 (codified at Minn. Stat. §§ 79.071-.073 (Supp. 1979) (amended 1980)).

182. Compare STUDY COMM'N, supra note 14, at 42-43 (Recolillilendation 44) with Act of June 7, 1979, ch. 3, § 6, 1979 Minn. Laws Ex. Sess. 1256, 1259 (codified at Minn. Stat. § 79.075 (Supp. 1979)).

183. Compare STUDY C0MM'N, supra note 14, at 43-44 (Recommendation 46) with Act of June 7, 1979, ch. 3, § 9, 1979 Minn. Laws Ex. Sess. 1256, 1260 (codified at Minn. Stat. § 79.10 (Supp. 1979)).

Page 44

184. Compare STUDY C0MM'N, supra note 14, at 49 (Recommendation 56) with Act of June 7, 1979, ch. 3, § 10, 1979 Minn. Laws Ex. Sess. 1256, 1260 (codified at Minn. Stat. § 79.171 (Supp. 1979)).

185. See STUDY CO:MM'N, supra note 14, at 47 (Recommendation 50).

186. Compare id. (Recommendation 51) with Act of June 7, 1979, ch. 3, § 16, 1979 Minn. Laws Ex. Sess. 1256, 1262 (codified at Minn. Stat. § 79.33 (Supp. 19 79)) •

187. See notes 26-32 supra and accompanying text.

188. The Workers' Compensation Study Commission held 40 meetings in the course of its study. See STUDY C0MM'N, supra note 14, at 7-15. For a sunnnary of the testimony offered at these meetings, see id.

189. See notes 132-38, supra and accompanying text.

190. See notes 34, 49, 157-60 supra and accompanying test.

191. Reductions are likely only for a minority of recipients of retraining benefits and for recipients of benefits paid by mistake. Increases will result for most retrainees, all recipients of supplementary benefits, some survivors of deceased employees, and employees or their survivors with very late claims. See generally Act of June 7, 1979, ch. 3, 1979 Minn. Laws Ex. Sess. 1256.

192. The new coverage is that of husbands under the presumption of spousal dependency and students between the ages of 21 and 25 who are dependents of deceased employees. See id. § 37, 1979 Minn. Laws Ex. Sess. at 1281 (codified at Minn. Stat. § 176 .111 (1) (Supp. 1979)).

193. See STUDY C0MM'N, supra note 14, at 17-18 (Recommendation 5). The maximum of 200% of the state average weekly wage would have meant that those earning between $339 and $678 weekly would receive two-thirds of their weekly incomes (between $225 and $452) as benefits, as do employees with less income, rather than a flat $226. Those earning over $678 would only receive $452. The insurance rating service for workers' compensation estimated that this proposal would increase workers' compensation costs by 4.9%, but this estimate did not consider the relative risk exposure of higher income workers. See Letter from J.P. Heldebrandt, General Manager, Minnesota Compensation Rating Bureau, to Senator Steve Keefe (Mar 15, 19 79) .

194. Workers' Compensation Rating Association of Minnesota, 1979 Rate Filing, Exhibit A, page 2.

Page 45

195. Compare STUDY COMM'N, supra note 14, at 22-27 (Recommendation 14) with Act of June 7, 1979, ch. 3, § 36, 1979 Minn. Laws Ex. Sess. 1256, 1278 (codified at Minn. Stat. § 176.102 (Supp. 1979)).

196. See Act of June 7, 1979, ch. 3, § 36, 1979 Minn. Laws Ex. Sess. 1256, 1278 (codified at Minn. Stat. § 176.102 (Supp. 1979)).

197. See id.

198. See id. § 43, 1979 Minn. Laws. Ex. Sess. at 1285 (codified at Minn. Stat. § 176.134 (Supp. 1979)).

199. See id. §§ 17-25, 1979 Minn. Laws Ex. Sess. at 1262-67 (codified at Minn. Stat. §§ 79.34-.42 (Supp. 1979) (amended 1980)).

200. For an analysis of this effect, see STUDY COMM'N, supra note 14, at 35, 44-45.

201. See A~t of June 7, 1979, ch. 3, § 38, 1979 Minn. Laws Ex. Sess. 1256, 1282, (codified at Minn. Stat. § 176.131(,l)(a) (1979)).

202. For an analysis of litigation and workers' compensation costs in Cali­fornia, see California Workers' Compensation Institute, supra note 19. For an analysis of this effect in Wisconsin, see STUDY COMM'N, supra note 14, at 199-213.

203. See Act of June 7, 1979, ch. 3, § 34, 1979 Minn. Laws Ex. Sess. 1256, 1273 (codified at Minn. Stat. § 176.101, subd. 3(40) (Supp. 1979)); STUDY COMM'N, supra note 14, at 19-20.

204. For an assessment of second medical opinion programs, see STUDY COMM'N, supra note 14, at 236-41.

205. Employers, under the 1979 Act, have increased opportunities for participation in the rate hearings, clearer standards for challenging rates, and improved means of challenging classification and rate decisions. In addition to particular changes in the 1979 Act, provisions of the Administrative Procedure Act applicable to contested cases are now to be applied to the rate hearings. The Commissioner's powers of inquiry, rate review, oversight, and regulation are also expanded. See Act of June 7, 1979, ch. 3, §§ 1-16, 1979 Minn. Laws Ex. Sess. 1256, 1256-62 (codified in scattered sections of Minn. Stat. ch. 79 (Supp. 1979) (amended 1980).

206. See e.g., id. § 6, 1979 Minn. Laws Ex. Sess. at 1259 (codified at Minn. Stat. § 79.075 (Supp. 1979)).

Page 46

207. See id. § 2, 1979 Minn. Laws Ex. Sess. at 1256 (codified at Minn. Stat. § 79.071 (Supp. 1979) (amended 1980)); id. § 10, 1979 Minn. Laws Ex. Sess. at 1260 (codified at Minn. Stat. § 79.171 (Supp. 1979)).

208. See id. §§ 11, 50, 1979 Minn. Laws Ex. Sess. at 1261, 1287 (codified at Minn. Stat. §§ 79.21, 176.181(2) (Supp. 1979)).

209. The deregulation of workers' compensation insurance premium rates over a five year period and the creation of a state workers' compensation insurance fund to compete with private workers' compensation insurers were both recommended by the Workers' Compensation State Fund Study Commission created by the 1979 Legislature. WORKERS' COMPENSATION STATE FUND STUDY COMMISSION, A REPORT TO THE MINNESOTA LEGISLATURE AND GOVERNOR, 3-7 (1980). Legislation incorporating these recommendations has been introduced in both houses• Legislation has also been introduced, incorporating several recommendations of the previous study commission, which would limit liability for benefit payments in some situations, reduce benefit costs and attempt to further encourage return to work.

APPENDIX A Page 47

RECOMMENDATIONS OF THE

WORKERS' COMPENSATION STUDY COMMISSION

BENEFITS

1. The Legislature should eliminate temporary total or other

weekly indemnity during the period that retraining benefits

are being paid, but increase the weekly retraining amount

·by 15 percent during any week in which the ·claimant is

participating in an approved retraining program.

2. The Legislature should prohibit payment of permanent

total and permanent partial compensation for the same injury

and provide for the payment of permanent partial compensation

only upon the employee's return to work.

3. The Legislature should reduce the minimum weekly compen­

sation benefit for temporary tota1 disability to· 66-2/3

percent of the wage at the time of the injury.

4. The Legislature should provide an offset against a

workers' compensation indemnity award in the amount of the

previous compensation where an existing disability has been

compensated and that disability is aggravated by a work

related injury.

5. The Legislature should provide for a maximum disability

benefit of 200 percent of the state average weekly wage.

(National Commission on State Workmen's Compensation Laws,

Recommendation #3.9, 3.16.)

6. The Legislature should permit recovery of benefits paid

due to mistake of fact, but, in cases other than permanent

partial lump sum awards, limit the recovery to no more than

20 percent of the weekly benefit payment, thereby protecting

qo percent of the weekly compensation.

Page 48

7. The Legislature should provide that yearly adjustment of

benefits be applied only after 104 weeks of disability.

8. The Legislature should provide for a specific list of

internal organs which are intended to be covered by the

statute. and indicate the compensation to be paid for the

loss of each organ under the permanent partial schedule.

9. The Legislature should remove the statutory presumption

that heart and arterial disease and pneumonia suffered by

peace officers are occupationally related and thus compensable.

10. The Legislature should remove the conclusive presumption

of dependency on behalf of widows where death results from

a work related injury and in its place create a conclusive

presumption of dependency in favor of both widows and widowers.

This presumption should exist for two years from the date of

death during which time weekly compensation will be payable

to· the widow·or widower. Following this period an offset of

SQ·. percent of income earned by the survivin·g spouse should_

be appl:,ied to the weekly benefits until such time as 5.0 per­

cent of the earned income is equal to the full benefit due

at which time the right to further death benefits should cease.

11. The Legislature should provide that· accrued benefits be

paid to dependents if the employee dies prior to the payment

of benefits.

12. The Legislature should provide for payment of death

benefits to a child until age 25 if and while the child is

enrolled as a full time student in an accredited educational

institution. (National Commission on State Workmen's Com­

pensation Laws, Essential Recommendation #3.25.)

13. The Legislature should extend mandatory workers' compen­

sation coverage to all elected and appointed officials of

Page 49

political subdivisions. (National Commission on State

Workmen's Compensation Laws, Essential Recommendation #2.6.)

RETRAINING AND REHABILITATION

14. The Legislature .should implement the following rehabili­

·tation and retraining proposals of the Workers' Compensation

_Advisory Council. (The Advisory ~ouncil, a separate and

distinct body from the Workers' Compensation Study Commission·,

is a perm~nent body created by statute to study workers' compensation.)

1. Any injury producing permanent disability which

will prevent an employee from ~dequately performing the

duties of the occupation _held at the time of injury should

be referred for rehabilitation consultation and subsequent

services where feasible.

2. Vocational rehabi1itation services should be

those training services designed to return the individual

to (1) a job related -to former-employment; (2) a job in

a nonrelated work field which produces an economic status

as close as possible to that enjoyed prior to the disability

with priority given to the former where possible.

Rehabilitation to a job with higher economic status,

then held before the disability, should be allowed ~f, as

a practical matter and because of physical limitation this

is the only vocation for which·the individual can be trained.

3. Rehabilitation Adminis•trators. The Conunissioner

of Labor and Industry should be authorized to µire qualified

Administrators of Rehabilitation and other assistance as may

be necessary to carry out the responsibilities laid out in

this recommendation. These personnel should be responsible

to the Commissioner.

It should be the responsibility of these Rehabilitati-on

Administrators under the direction of the Commissioner of

Labor and Industry to supervise the delivery of all rehabili­

tation services provided for. The Rehabilitation Administra-

Page 50

tors should have the power to approve, modify or disapprove

plans submitted to the Department.

In the event of a dispute by an insurer,· employer or

employee with respect to a plan approved, modified or rejec­

ted by the Administrator, upon the request of any party, the

plan should be submitted to the Rehabilitation Review Panel

for determination.

4. Rehabilitati·on Review Panel. There should be

established a Rehabili_tation Review Panel composed of the

Conunissioner of Labor and Industry or his designated Repre­

sentative, equal representation from labor, employers,

insurers, vocational rehabilitation, physi~ians and other

medical specialities, each of whom should be qualified by

experience and.training and appointed by the Governor.

It should be the responsibility of this panel to

review and make determination of appeals filed with regard

to rehabilitation programs; hold revocation of approval

he~rings ·as necessary; continuously study rehabilitation,

both physical and vocational~ and develop and recommend

rehabilitation regulations to the Commissioner of Labor.

S. Rules and Regulations. The Commissioner of

Labor and Industry, .in consultation with the Rehabilitation

Review Panel and other interested parties, should promulgate

rules and regulations governing approval_ of applications

for accreditation of all public and private rehabilitation

facilities and all functions, staffing, etc. desiring to

provide workers• .compensation rehabilitation services.

The Commissione·r should approve any public or pri­

vate rehabilitation facility or.institution meeting the

standards as set forth by rule. The Commissioner should •

have the authority to revoke.approval, if after hearings

by the Rehabilitation Review Panel, it is found such fa~

cility is not conducting itself according to the require­

ments of the regulations set forth by the Department.

6. Plan Formulation. Within 30 days or immediately

when the employer/insurer has medical information that an

injured employee will be unable to return to his pre-

Page 49

political subdivisions. (National Commission on State

Workmen's Compensation Laws, Essential Recommendation #2.6.)

RETRAINING AND REHABILITATION

14. The Legislature .should implement the following rehabili­

·tation and retraining proposals of the Workers' Compensation

_Advisory Council. (The Advisory ~ouncil, a separate and

distinct body from the Workers' Compensation Study Commission·,

is a perm~nent body created by statute to study workers' compensation.)

1. Any injury producing permanent disability which

will prevent an employee from ~dequately performing the

duties of the occupation _held at the time of injury should

be referred for rehabilitation consultation and subsequent

services where feasible.

2. Vocational rehabi1itation services should be

those training services designed to return the individual

to (1) a job related -to fo:z:mer-employment; (2) a- job in

a nonrelated work field which produces an economic status

as close as possible to that enjoyed prior to the disability

with priority given to the former where possible.

Rehabilitation to a job with higher economic status,

then held before the disability, should be allowed ~f, as

a practical matter and because of physical limitation this

is the only vocation for which·the individual can be trained.

3. Rehabilitation Administrators. The Commissioner

of Labor and Industry should be authorized to ~ire qualified

Administrators of Rehabilitation and other assistance as may

be necessary to carry out the responsibilities laid out in

this recommendation. These personnel should be responsible

to the Commissioner.

It should be the responsibility of these Rehabilitation

Administrators under the direction of the Commissioner of

Labor and Industry to supervise the delivery of all rehabili­

tation services provided for. The Rehabilitation Administra-

Page 50

tors should have the power to approve, modify or disapprove

plans submitted to the Department.

In the event of a dispute by an insurer,· employer or

employee with respect to a plan approved, modified or rejec­

ted by the Administrator, upon the request of any party, the

plan should be submitted to the Rehabilitation Review Panel

for determination.

4. Rehabilitation Review Panel. There should be

established a Rehabili.tation Review Panel composed of the

Commissioner of Labor and Industry or his designated Repre­

sentative, equal representation from labor, employers,

insurers, vocational rehabilitation, physi~ians and other

medical specialities, each of whom should be qualified by

experience and.training and appointed by the Governor.

It should be the responsibility of this panel to

review and make determina~ion of appeals filed with regard

to rehabilitation programs; hold revocation of approval

he~rings as necessary; continuously study rehabilitation,

both physical and vocational~ and develop and recommend

rehabilitation regulations to the Commissioner of Labor.

S. Rules and Regulations. The Commissioner of

Labor and Industry, .in consultation with the Rehabilitation

Review Panel and other interested parties, should promulgate

rules and regu1ations governing approval. of applications

for accreditation of all public and private rehabilitation

facilities and all functions, staffing, etc. desiring to

provide workers• .compensation rehabilitation services.

_The Commissioner should approve any public or pri­

vate rehabilitation facility or institution meeting the

standards as set forth by rule. The Commissioner should

have the authority t~ revoke approval, if after hearings

by the Rehabilitation Review Panel, it is found such fa~

cility is not conducting itself according to the require­

ments of the regulations set forth by the Department.

6. Plan Formulation. Within 30 days or immediately

when the employer/insurer has medical information that an

injured employee will be unable to return to his pre-

Page 51

injury occupation or employment for which he has previous

training or experience, the employer/insurer should pro­vide for rehabilitation consultation for the employee.

In case of failure by the employer/insurer to provide

rehabilitation the rehabilitation administrator should

notify the division of vocational rehabilitation· so that it may provide these services. Upon determination that

a program of rehabilitation would significantly reduce or

eliminate the decrease in employability, the rehabilitation

consultant should develop a specific plan for submission

by the employer/insurer to the Rehabilitation Administra­

tion of the Department of Labor.

Disabled employees should be required to submit to all reasonable requests for examination and evaluations

considered necessary to determine need for rehabilitation,

or to develop a plan for rehabilitation and to cooperate in implementation once a plan has been developed and ap­proved.

In developing the plan, consideration should be given .to the employee's age, education, previous work

· history, interests and skills.

On-the-job training shoula be specifical1y allowed -where such training would produce an economic status similar to that enjoyed prior to the disability.

If after consultation with an accredited rehabilita­

tion facility it is felt, that due to the disabl.ed·worker's

age, education, disability, etc., successful rehabilitation is unlikely that determination should be filed with the

Rehabilitation Administrator. 7. Where on-tbe-job training is provided in the

rehabilitation plan, the plan may compensate an employee

up to the wages earned prior to disability in lieu of temporary total disability payments otherwise authorized by the Act, for a limited time. Such subsidization should

~e extended for an additional period upon request by the

rehabilitation facility to the insurer/employer for an

Page 52

extension if the extension is approved by the Rehabilita­

tion Administrator.

Compensation in part or in full shall be made to an

employer, who is willing to provide on-the-job training to

a disabled worker when the on-the-job training would nor­

mally be economically disadvantageous.

8. Reporting. Upon approval of a rehabilitation

plan by the Rehabilitation Administrator, the rehabilita­

tion facility should provide periodic progress reports to

the Department of Labor, employer and insurer.

9. Plan Modifications. Upon application by an

employer, insurer, or disabled worker to the Rehabilita­

tion Administrator, the plan should be suspended, termi­

nated or changed_ upon a showµig of good cause, including

but not limited to;

a. A physical impairment that would not allow

the worker to follow the vocation being trained for;

h. The worker's perfoJ:maDce level indicates

he cannot complete the course satisfactorily.

c. The worker fails or refuses to cooperate

in the program;

. d. The-worker requests termination of the

program in favor of a different program because

he feels he is not suited for the type of work

for which training is being provided. A change

of program for this reason should only be ordered

once, and only if the request is made by the worker

within 90 days after commencement of the training

period.

Appeal of such a change should be filed with the

Administrator within 15 days for hearing by the Re­

habilitation Review Panel for f-inal determination.

lOe Rehabilitation Costs. Rehabilitation expenses

to be covered by.the employer should be limited to:

a. Cost of vocational rehabilitation diagnosis

and formulation of plan •.

Page 53

b. Cost of all rehabilitation services and

supplies deemed necessary for the implementation of

the approved plan.

c. Tuition, books and the reasonable costs of

board, lodging and travel when rehabilitation re­

quires residence away from the employee's customary

residence.

d. Any other necessary expense agreed to by the.

insurer/employer.

ADMINISTRATION

Department of Labor and Industry

15. The Legislature should provide the Commissioner of Labor

and Industry with the authority to promulgate by rule, schedules

which would permit an objective assessment of degree of dis­

ability. In promulgating these rules the Commissioner should

examine the schedules in use in Wisconsin, California, and

other states, that. of the American Medical Association and

other appropriate sources. The Legislature should provide

additional funding to the Department of Labor for this·

purpose.

16. The Department of Labor and Industry should consult with

the medical and chiropractic professions to develop a medical

fee schedule.

17. The Department of Administration should, with the option

of hiring outside consultants, study and make recommendations

for the improvement of the D~partment of Labor and Industry

data and recordkeeping systems, with special attention to

computer and microfilming applications.

18. The Legislature should provide for an increase in the

~taff of the Department of Labor and Industry which monitors

self-insuring employers.

Page 54

Notice

19. First reports of injury should be completed by the

employer in triplicate, with copies submitted to the insurer

and the Workers' Compensation Division.

20. The Legislature should provide that the current require-

·ment that notice of injury must be given to an employer within

180 days after the injury, is not satisfied by notification

to the employer by a medical carrier that an employee is

receiving treatment or payments for such medical treatment,

unless the notice-expressly indicates that the treatment is

for a work related condition.

21. Whe~e an employee is unable, because of mental or physical

incapacity, to give notice of injury to the employer within

l~O days from the injury,the time within which the employee

should -be required to give notice should be extended to 180

days from the date the incapacity ceases.

22. The Commissioner of Labor and Industry should furnish to

employers covered by workers' compensation a booklet explaining

their rights and obligations under the statutes and rules.

23. The Connnissioner of Labor and Industry should develop

an in-formational brochure to be distributed to employees upon

first report of injury. The brochure should minimally include

an injured employee's rights under the law, assistance avail­

able to the employee, and the operation of the compensation

system.

24. A notice advising employees of their rights under the

law, assistance available to them, and the operation of the

compensation system should be posted in all places of

employment.

Page 55

Workers' Compensation Court of Appeals

25. The Legislature should expand the Workers' Compensation

Court of Appeals to five members. Of these five members, two

members should be appointed to represent employees, two mem­

bers should be appointed to represent employers, and one mem­

ber should be a neutral public representative. The neutral

.individual and at least one of the employee and one of the

employer representatives should be required to be learned

in the law.

26. The Workers' Compensation Court of Appeals shoul-d be

physically separate from the Division of Workers' Compensation •.

27. Additional hearing rooms .should be made available by the

Legislature to the Workers' Compensation Division.

28. The Legislature should permit a workers' compensation

judge.to consider the workers' compensation expertise of the

attorney when awarding fees.

Special Fund

29. The Legislature should establish a reopened case fund

which will be liable for any compensation due an employee

resulting from a reopening of a workers' compensation claim

if that case is reopened 7 years from the date of an injury

or 3 years from the date of the last compensation payment,

whichever is later. In addition, the Legislature should

preclude the reopening of claims against the fund if the

claim is made more than 18 years from the injury or 8 years

from the last payment of an original award, whichever is

later.

30. The Legislature should permit an employer to register

an employee's pre-existing condition with the "special fund"

subsequent to as well as prior to an injury to the ·employee.

Page 56

31. The Legislature should provide that investment income

from the "special fund" be placed back in the fund, rather

than in the general fund.

32. The Legislature should provide that liability for

aggravation of existing injuries to individuals in on-the­

job training should be assessed against the "special fund"

and not the employer.

33. The-Legislature should provide the Commissioner of Labor

and Industry the power to authorize the payment, from the

"special fund," of benefits to an employee who suffers a

work related injury, when the Commissioner determines the

injury is work related and the sole issue is which insurer

is liable. When liability is determined the special fund

should be reimbursed by the liable party~

Medical

34. ·The Legislature should require the compensation judges

to appoint a neutral doctor for a third medical -opinion at

the request of either party in contested cases. A list of

neutral.doctors should be developed by the Department of

Labor and Industry.

35. The Legislature should require a mandatory second

opinion on certain elective surgical procedures covered by

workers' compensation.

36. The Legislature should provide that medical carriers

pay medical benefits when there is a dispute of primary

liability, and provide that the worke·rs' compensation carrier

be billed if workers' compensation liability is then established.

Department of Insurance

37. The Legislature should eliminate the ceiling on salaries

for hiring an actuary by the Insurance Commissioner.

Page 57

38. The Legislature should increase the staff of the

Insurance Division to assist with rate determination, with

special emphasis given to employing legal assistance and an

economist.

Rating Bureau

39. The Legislature should change the name of the "Minnesota

Compensation Rating Bureau" to the "Workers' Compensation

Rating Association of Minnesota" as of October 1, 1979.

40. The Legislature should prohibit suits! by an employee

entitled to workers' compensation benefits, against a fellow

empl9yee except when the fellow employee has caused the

worker's injury intentionally or through acts of gross

negligence.

41. The Legislature should provide that employees giye

notice to their employers in all cases where );he employee

is filing a claim for or seeking a change in compensation,

retraining or other workers' compensation benefits.

INSURANCE/RATEMAKING

42. The Legislature should prohibit retroactive rate

adjustment.

43. The Legislature should give the Commissioner of Insurance

the authority to establish by rule an automatic rating formula

(to be developed with the assistance of the insurance industry

and other interested parties) which will allow premiums to be

automatically adjusted as a result of legislated benefit

changes. The automatic increase as well as the benefit changes

should take effect on January 1.

44. The Commissioner of Insurance should review during rate

hearings any automatic rate changes which have taken effect

Page 58

since the previous rate·hearing and the Commissioner should

have the authority to grant a rescission and prospective

premium reduction as necessary.

45. The division of payroll for thepurposesof rate calcula­

tion should be allowed upon the request of an employer if an

employee falls within two rate classifications and the employer's

records support such division.

46. The ~egislature should provide a formal hearing process

before the Commissioner of Insurance for employers appealing

a compensation rating bureau classification decision and allow

the Commissioner to alter classifications and determine

adequate applicable rates.

47. The Legislature should establish a state reinsurance

fund which would provide exclusive coverage for all benefits

due on claims continuing after five years from the date of

injucy. Coverage should be provided directly to insurers and

self-insurers. The reinsurance fund should operate on a

premium basis rather than by assessments, and initial" funding

should be provided by the sale of revenue bonds.

48. The Commission recommends that the Commissioner of

Insurance prohibit assigned. risk pool insurers from receiving

a higher expense loading than is allowed for non-assigned

risk pool coverage, except for actual adjustment expenses,

as opposed to the current practice of including loss adjust­

ment with other expense items.

49. The Commission recommends that the Commissioner of

Insurance consider and recommend to the Legislature alternative

modes of conducting rate hearings in which the format would

be more consistent with his position as neutral arbiter than

the present Chapter 15 rule-making method in which the

Corranissioner proposes the rate.

Page 59

50. The Commissioner of Insurance should establish a maximum

wage base (in relation to maximum benefits) upon which

premiums are to be calculated.

51. The Commissioner of Insurance should require insurers

to extend the experience-rating system to more employers

than are now covered by the $750 premium minimum.

·s2. The Commissioner of Insurance should require insurers

to use life expectancy tables, if available, appropriate for

persons with equivalent disabilities when establishing case

reserves.

53. The Commissioner of Insurance should require the rating

bureau to separate incurred but not reported losses from

other recerve components and explain how such amounts have

been determined.

54. The Cpmmissioner of Insurance should require the rating

bureau to separate paid and outstanding losses· in rate proposals·.-·

55. The Commissioner of In$urance should require insurers to .

give notice when an individual workers' compensation case

reserve is established which is in excess of $50,000.

56. The Commissioner of Insurance should consider insurers'

investment income on workers' compensation reserves when

establishing rates.

57. Pain should be retained as a compensable consideration

in disability indemnification.

Page 60

MOTIONS DEFEATED

1. Apportionment of permanent partial disability between

work related and non-work related conditions.

2. Reduction in permanent partial disability benefits of

2-1/2 percent for each year an employee is over 52, with the

.maximum reduction being 50 percent.

3. Limit the receipt of death benefits to 1,000 weeks.

4. Remove the present prohibition on attorneys' fees being

paid from supplemental benefits unless the receipt of such

benefits is the only issue in the case.

5. Permit an employee's legal. fees to be recovered from

the special compensation fund when the only item in dispute

is whether the insurer is entitled to reimbursement from the

fund and the fund is eventually found liable for such

reimbursement.

6. Workers' compensation claims.for state employees shall

be handled by the Department of Personnel, rather than the

Department of Labor and Industry.

7. Require the Commissioner of Insurance to establish rates

based only on pure premiums (anticipated losses only) with

the expense loading allowed to float in open competition.

8. Insurance rates should be determined by open competition.

9·. Establish a competitive state fund to compete with

commercial insurers in providing workers' compensation

coverage.

10. Transfer the statutory rating functions of the rating

bureau to the Commissioner of Insuranceo

Page 61

MINORITY RECOMMENDATIONS

FROM 'l'HE

WORKERS' COMPENSATION STUDY COMMISSION

1. Establish a competitive state insurance fund.

2. Retain the present system of competitive-, commercially-­

provided reinsurance in workers' compensation.

3. Provide for the apportionment of liability between pre­

existing .non-occupational conditions and occupational injuries

when the two combine to produce a permanent partial disability.

4. Retain the present maximum disability benefit 100 percent

of the state average weekly wage, rather than increase the

maximum to 200 percent.

5. Provide for the reduction of permanent partial disability

benefits when an employee is over the age of 52 at the time

of· _injury, by 2-1/2 percent for each yea+ above that age to

a maximum reduction of SO percent.

6. Provide for a legal presumption of the reasonableness of

settlements entered into by an insurer or employer and a

claimant when both are represented by an attorney.

7. Provide that weekly benefit payments be calculated to

the nearest $1.00.

8. Permit a workers' compensation judge to make a factual

determination of the degree of disability within the range

established by the physicians' opinions when these opinions

differ significantly.

9. Replace the state average weekly wage, the current

maximum weekly amount used in the computation of permanent

partial awards, with the dollar figure of $200.

Page 62

10. The statutory rating functions of the rating bureau be

transferred to the Commissioner of Insurance.

11. The National Council of Compensation Insurers (NCCI)

be prohibited from involvement in the Minnesota rate setting

process.

12. The Rating Compensation Bureau members represent the

insurance industry, business, labor and the public.

13. Congress be memorialized to repeal interstate immunity

of the insurance industry (Mccarron-Ferguson Act).

14. The current expense factor used in rate-making and

expenses 1 incurred by the insurance companies for administering

the premium dollars be set by law.

-is. All Commission recommendations dealing with benefit

reductions be disregarded.

16. Wages for vacations, holiday and sick leave should not

be included in premium calcualtions and rates for workers'

compensation.

.egislative Analysts Karen M Baker James D Cleary Gary " r:urrie Bart i Diamond John __ ,tovich John Helland

Af'l'ENDIX B

Minnesota Page 63

House of Representatives RESEARCH DEPARTMENT

17 ST A TE CAPITOL

ST. PAUL 55155

(612) 296-6753

September 19, 1979

Peter 8. Levine

Director

Stephen D. Hinze Alan R. Hopeman Kevin P Kenney Kathryn lamp Deborah K. McKnight Joel T. Michael Samuel W Rankin Douglas P. Seaton Emily Shapiro Mark Shepard Jonathan Steinberg Thomas M. Todd John Williams

Administrative Assistant

Barbara Heikes

Legislative Assistant

Karin Johnson

TO:

FROM:

RE:

Members, House Governmental Operations~nttee

Douglas P. Seaton, Legislative Analyst~

Summary of Chapter 3, 1979 Special Session, the Workers' Compensation Act

The following is a summary of Chapter 3, the major workers' compensation statute of. 1979. The bill was identical to H.F. 946/S.F. 917 as reported by the Conference Committee, with minor technical changes, and incorporates most of the Study Co1TII:tis~ion __ -recommendations.

RATEMAKING (Sections 1-12) [Rec. No.· 39, 42, 43, 44]

Sections 1-12 establish ~nd modify procedures and requirements in the workers' compensation rate-making process, permit rates lower than those approved and disallow certain inclusions-in premium calculation. Specific provisions follows.

DEFINITIONS RATING BUREAU NAME CHA.i.~GE [Rec. No. 39, 46, 49, 51] , .

Section 1 inserts definitions of interested party and schedule of rates to permit employer associations, the reinsurance association and the insurance division to take part in rate hearings, and to include experience­rating and discount systems in the rate review. The Minnesota Compensation Rating Bureau is also renamed the Workers' Compensation Rating Association o~ Minnesota.

RATE-MAKING HEARING [Rec. No. 49]

Section 2 pro~1ides a formal procedure to be followed by the commissioner of insurance in the rate-making process in workers' compensation, as was recommended by the Study Commission. The commissioner of insurance may hold a hearing to modify rates on petition from an interested party, but may decline within 30 days _if insufficient data has been provided or need is not demonstrated. Chapter 15 contested case procedures are to be followed in any hearings, with provision for liberal evidentiary rules and the burden of proof on the petitioner. The commissioner within 90 days may modify the rates as determined in the hearing where evidence supports

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him and may hire an actuary or others to assist him in the hearings, the cost to be assessed to insurers. The hearing examiner may hire assistants as well. Excessive, inadequate or unfairly discriminatory rates are dis­allowed.

RE-HEARINGS [Rec. No. 49]

Section 3 includes procedures for an interested party to petition for a rehearing within 30 days of the commissioner's rate determinations. The commissioner may decline to rehear, but if he does so he may modify his determination on adequate factual grounds including errors in the hearing or changes.since the original petition.

JUDICIAL REVIEW [Rec .• No. 49]

Section 4 provides for discretionary judicial review of the commissioner's rate determinations without suspension of the rates.

DISCRIMINATORY RATES [Rec. N~. 49]

Section 5 adds provisions against .unfairly discriminatory rates and dividends in workers' compensation.

AUTOMATIC RATE ADJUSTMENTS [Rec. No. 42, 43, 44]

Section 6 inserts statutory language providing for automatic adjustment of rates to reflect legislative benefit changes as recommended by the Study Commission as a substitute for retroactive increases. The connnissioner may later review ·the increases in the rate hearings.

RATE MANUAL [Rec. No. 49]

Section 7 specifies ·the applicability of new rates and prescribes standards for the amendment -o-f the manual of rates. The current rate manual may be approved, but a hearing must be held, if petitioned for, on certain portions of the manual (see section 65). The manual would remain in effect during the hearing. Amendments to the manual would be by contested case hearing.

INSURANCE ACTUARY [Rec. No. 37]

Section 8 lifts the salary ceiling limiting an actuary in the insurance division to 90% of ·the commissioner's salary.

REGULATION [Rec. No. 46]

Section 9 provides new language relating to acts and decisions of insurers~ The insurance division may investigate, conclude findings and propose orders under chapter 79 on petition of any person. Contested case hearings are provided.

RATING BUREAU DATA REPORTING [Rec. No. 53, 54, 55, 56]

Section 10 requires the rating bureau to provide more detailed information on losses and to report investment income on reserves, as well a~ each , reserve over $50,000, and empowers the commissioner of insurance to refu·se

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a rate hearing if data is not provided.

COMPETITIVE RATES [Related to Defeated Motions 7, 8]

Section 11 permits an insurer to offer premiums lower than the approved rates.

HOLIDAY TIME AND DIVISION OF PAYROtL [Rec. No. 45, Minority Rec. 16]

Section 12 disallows the inclusion of vacation, holiday or sick time in workers' compensation premium calculations, and requires the division of an employer's p~yroll among different rating classifications when his records are adequat.e to justify this.

REOPERED CASE FUND .(See Section 43) [R N 29] ec. o.

Section 13 provides for the connnissioner's annual review of the reopened case fund and recommendation of assessments.

INDEPENDENT CONTRACTORS' PAYROLL EQUIVALENTS

Section 14 permits the connnissioner of insurance to establish a formula to determine the remuneration of contractors when payroll cannot be determined.

ASSIGNED RISK POOL [Rec. No. 48]

Section 15 prohibits additional expense allowances for assigned risk policies •.

EXPERIENCE RATING/ACTUARIAL TABLES [Rec. No. 51, 52]

Section. 16 permits the commissioner of insurance to study the extension of experience-rating to smaller employers and to require the use.or development of actuarial tables appropriate for the disabled.

REINSURANCE ASSOCIATION (Sections 17-25) [Rec. No. 47]

Sections 17-25 create a mandatory reinsurance association whose members would include all workers' compensation insurers and self-insurers. The reinsurance association would be liable for all payments over $300,000 or $100,000 at the members' option arising from a single occurrence. These amounts would be indexed to rises in the state average weekly wage. Liability would begin October 1, 1979. Specific provisions fallow •..

FUND, ME:MBERSHIP, LIABILITY [Rec. No. 4 7]

Section 17 creates the reinsurance association, makes membership mandatory for all insurers and self-insurers under chapter 176 and exempts the reinsur­ance association from chapter 15. The threshold for reinsurance association liability is set at $300,000 or $100,000.at the members' option and indexing is provided for. The reinsurance association is made liable for insolvencies among its membership. Mergers would not extinguish members' liabilities. Reserving above the reinsurance associatio~'s liability threshold by insurers is prohibited.

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POWERS [Rec. No. 47]

Section 18 specifies the duties and powers of the reinsurance association including liability as prescribed in section 17, procedures for claims reports from members, record-keeping, annual reports to members, review of members' practices relative to the reinsurance association and calculation and charging of premiums, sufficient to cover losses and operating expenses, in the form of a fixed percentage of premium. Premiums are to be calculated to generate reserves on losses of $500,000 or less, but higher losses are to be paid as they are due.

POWERS [Rec. No. 47]

Section 19 prescribes additional powers including powers to sue and be sued, to commercially reinsure all or part of the _reinsurance association's liability, provide and contract for facilities, services, staff and equipment, adopt· rules, intervene in any proceeding likely to affect the reinsurance association, hear complaints and do other acts necessary or proper to the operation of the reinsurance association.

BOARD OF DIRECTORS _[Rec. No. 47]

Section 20 creates a board of directors of the reinsurance association to consist of nine members representing insurers (4), employers (3) and employees (2). The cormnissioner of insurance is a non-voting member. Action is by a majority of those present.

PLAN OF OPERATION (See Section 25) [Rec. No. 47]

Section 21 provides that the plan of operation to be adopted by the initial reinsurance association board shall include a preliminary premium for start­up costs, procedures for calc~lating and charging premiums, board members' compensation, terms and the like, investment policies, provision for· · facilities and administration.

REGULATION BY INSURANCE COMMISSIONER [Rec. No. 47]

Section 22 makes the reinsurance association subject to regulation by the commissioner of insurance under chapter 79 as are other workers' compensation insurers.

INCLUSION OF PREMIUM IN RATES [Rec. No. 47]

Section 23 provides that the premium charged by the reinsurance association will be treated'in the same manner as special fund assessments in insurers~ rate-making under chapter 79.

PROVISIONAL BOARD OF DIRECTORS [Rec. No. 47]

Section 24 gives the commissioner of insurance power to appoint a provisional _ board of directors of the reinsurance association.

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PLAN OF.OPERATION (See Section 21) [Rec. No. 47]

Section 25 requires this board to develop and submit to the cormnissioner a plan of operation for the reinsurance association. If the board does not the commissioner is empowered to develop and implement one. The plan would be subject to the approval of the commissioner and the membership.

APPEALS COURT [Related to Rec. No. 25]

Section 26 increases the number of Workers' Compensation Appeals Court judges from three to five and would permit no more than two to be laymen.

LOCATION WORKERS' COMPENSATION COURT OF APPEALS [Rec. No. 26)

Section 27 provides for a location for the workers' .compepsation court of appeals separate.from the offices of the department of labor and industry.

Section 28 is technical.

PEACE OFFICER PRESUMPTION [Contra Rec. No. 9]

Section 2S retains the current presumption of work-relatedness for certain conditions of peace, fire and other officers and adds DNR forest officers to those to whom the presumption applies.

CONCURRENT PAYMENTS [Rec. No. 11, Related to Rec .. No. 2-J..

Section 30 permits concurrent payment of temporary partial, temporary total or permanent total benefits with permanent partial benefits, but would require.payment of permanent partial benefits in 25% installments each month after the first, until return to work, when all remaining payments would ·be made.

CO-EMPLOYEE LIABILITY [Rec .. No. 40]

Section 31 limits the liability of a co-employee of the injured employee to intentional or grossly negligent acts.

EXPERTISE OF ATTORNEY CONSIDERED IN FEES [Rec. No. 28]

Section 32 allows the workers' compensation judge to consider an attorney's expertise in workers' compensation in_ setting fees.

MAXIMUM AND MINIMUM BENEFIT _[Contra Rec. No. 3,· 5, See Minority Rec. No •. 4]

Section 33 retains the current maximum benefit of 100% of the state average, weekly wage (SAWW) for temporary total. (No one would receive more than 66-2/3% of his actual wage.) The minimum benefit fo~ temporary total of 50% of the SAWW is also retained.

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MAXIMUM BENEFIT AND INTERNAL ORGAN SCHEDULE [Rec. No. 8, Contra Rec. No. 5, See Minority Rec. No. 4]

Section 34 retains the 100% maximum benefit for permanent partipl benefits and deletes ~ome extraneous language. The schedule of internal organs in the original bill is deleted and replaced with a power in the commissioner of labor to promulgate such a schedule by rule.

Section 35 is technical.

REHABILITATION AND RETRAINING BENEFITS [Rec. No. 1, 14]

Section 36 provides comprehensive procedures for rehabilitation under workers' compensation. This section stresses comparable employment and on-the-job training. Retraining to a higher status would be permitted when employability would be increased. Employers' role in selecting rehabilitation providers_ is increased and private providers may be approved by the commissioner of labor The employer·would be required to offer rehabilitation and develop a plan ~ithi 30 days of knowing rehabilitation is necessary. The employee would retain the power to select a rehabilitation-provider. On-the-job trainees would receive their full after-tax pre-injury wage and other retraining cl~imants would receive 125% of the usual temporary total benefits. The commissioner would approve rehabilitation plans subject to review by a review panel.

DEATH BENEFITS [Rec. No. 12, Related to Rec. No. 10]

Section 37 provides that both spouses are eligible for death benefits, and permits children who are students to receive benefits until age 25.

SPECIAL FUND LIABILITY FOR ON-THE-JOB TRAINING INJURIES [Rec. No. 32]

Section 38 provides that the special fund would be liable ·for additional payments under workers' compensation when an· on-the-job training employee is injured.

REGISTRATION OF PREVIOUS IMPAIRMENTS [Rec. No. 30]

Section 39 specifies that registration of pre-existing physical impairments afte.r an injury must be based on medical reports prior to the injury. Regis­tration would mean that the Special Fund would pay benefits after a second injury after 52 weeks.

SPECIAL FUND TO RETAIN INVESTMENT INCOME [Rec~ No. 31)

Section 40 requires investment income to be retained in the workers' compen­sation special ~und rather than be paid into the general fund.

SUPPLEMENTARY BENEFITS

Section 41 increases benefits under the supplementary benefit provision from 60% to 65% of the SAWW. This section affects older claims.

BENEFIT CHANGESJ EFFECTIVE DATE [Related to Rec. No. 43]

Section 42 would make legisla_tive benefit changes effective the October 1 after enactment.

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REOPENED CASE FUND (See Section 14) [Rec. No. 29)

Section 43 provides a new reopened case fund which would assume liability for all new claims filed after 7 years from the injury, and all new reopenings

·of old claims 7 years after the injury or three years after the last benefit payment, whichever is later. A time limit on thia fund's liability in the original bill was deleted.

SECOND SURGICAL OPINION [R N 35] • ec. o.

Section 44 provides for a mandatory second opinion before surgery is performed in workers' compensation. If either opinion favored surgery the employee could cho~se surgery.

EXCESSIVE MEDICAL CHARGES [Related to Rec. No. 16]

·section 45 empowers the commissioner of labor to identify excessive charges for particular medical services and to establish reasonable charges in such cases.

POSTED NOTICE Of RIGHTS [Rec. No. 24]

Section·46 requires .the posting of a notice of employees' rights and obliga­tions under the workers' compensation statute at work places.

NOTICE BY EMPLOYEE.OF INJURY [Rec. No. 21]

·section 47 provides that an employee who is· unable to give notice within the 180 days now required, may do so within 180 days of the end of his incapacity.

NEUTRAL PHYSICIAN'S OPINION [Rec. No. 34]

Section·48 would give either party a right to a neutral physician's opinion on a claim when requested at least 30 days prior to pre-hearing. The commis­sioner of labor would determine neutrality.

RECOVERY OF MISTAKEN PAYMENTS [Rec. No. 6]

·section 49 pennits erroneous benefits to be recovered from future benefits at· a rate not to exceed 20% of the weekly rate.

TRANSFER OF SELF~INSURANCE REGULATION TO COMMISSIONER OF INSURANCE [Related to Rec. No. 18]

Section 50 transfers responsibility for administration of employers' self­insurance under workers' compensation from the commissioner of labor to the commissioner of i~surance. This section also requires chapter 15 procedures for determination of standards and requirements fo! such self­insurance and requires licensing and regulation of administrators of group self-insurance programs.

SELF-INSURING POLITICAL SUBDIVISIONS INDEMNITY

Section 51 pennits indemnification of political subdivisions which self­insure for workers' compensation payments in excess of their self-insurance premiums and assets, subject to repayment.

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PAYMENTS WHEN LIABILITY DISPUTED, DETERMINED LATER [Rec. No. 33, 36]

Section 52 requires an employer or insurer to reimburse the department of welfare if workers' compensation liability is later established for medical treatment paid for at public expense. This section otherwise provides that benefits shall be paid by the special fund when liability is disputed between workers' compensation insurers and recovered when it is established. A medical carrier would also pay and recover medical costs later if workers' compensation liability were established.

PENALTIES FOR FAILURE TO- MAKE PAYMENTS

Section 53 imposes monetary penalties for failure to pay or deny liability for treatment charges or retraining expenses within 30 days of notice of the injury to the employer or insurer. (Failure to pay compensation itself is already penalized.)

NOTICE TO INSURER [Rec. No. 19)

Section·54 requires an employer to notify the insurer in addition to the commissinner of labor, when an injury occurs.

NOTICE TO COMMISSIONER OF LABOR [Rec. No. 19]

Section 55 requires a quadruplicate notice of injury to the commissioner.

BROCHURE FOR EMPLOYEES AND EMPLOYERS ON WORKERS' COMPENSATION [Rec, No. 22, ?1]

Section 56 provides £or a brochure for both employees and employers explain­ing the operation 0£ the workers' compensation system •

. DISCONTINUANCE OF BENEFITS

Section 57 requires employers or insurers to provide reasons for the dis­·continuance of benefits before benefits may be discontinued.

NOTICE.Of INTENT TO CHANGE BENEFITS [Rec. No. 41]

Section 58 provides for notice to the insurer or employer before proceedings ·~r·e 'initiated to claim or change benefits except where this would result in a claim being barred by time limits.

NEUTRAL PHYSICIAN'S OPINION (See Section 48) [Rec. No. 34)

Section 59 requires that neutral physicians be _appointed from the list to be maintained by the commissioner of labor.

INTERVENORS' APPROVAL OF SETTLEMENTS

Section 60 requires settlements of workers' compensation claims to be signed by intervenors who have an interest in the result.

STUDY OF DEPARTMENT OF LABOR WORKERS' COMPENSATION RECORDKEEPING [Rec. No •. j

Section 61 provides for a study of the department of labor's recordkeeping systems by the department of administration.

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COMMISSIONER OF LABOR TO PROMULGATE ORGAN A.ND DISABILITY SCHEDULES [Rec. No. 8, 15]

Section 62 includes power to the commissioner of labor to promulgate by rule a schedule of internal organs, and a general disability schedule.

ADDITIONAL HEARING ROOMS [Rec. No. 27]

Section 63 provides for three additional workers' compensation hearing rooms.

SECOND OPINION STUDY (See Section 44) [Related to Rec. No. 35]

Section 64 provides for a study of the second surgical opinion required for workers' compensation surgery with a report January 1, 1983.

CHALLENGE.TO CURRENT RATE MANUAL [Related to Rec. No. 49, 51)

Section 65 permits certain sections of the current rate manual to be challenged under chapter 15 by an interested party within 90 days of this bill's enact­ment. The manual would remain in effect during the hearing.

APPOINTMENT OF JUDGES (See Section 26) [Related to Rec. No. 25] ·

Section t;6 requires the appointment of two additional lforkers' Compensation Appeal Court judges by August 1, 1979.

JOINT LEGISLATIVE STUDY COMMISSION ON FEASIBILITY. OF A STATE COMPETITIVE FUND [Related to Minority Rec. No. 1, Defeated motion 9]

Section 67 provides for a joint legislative commission of six members from . each house to study the feasibility of a state competitive fund and report to the legislature by January 1, 1981.

Section 68 is technical. [Related to Rec. No. 39]

APPROPRIATIONS [Related to many Recs., specifically Rec. No. 18 1 38]

Section 69 is a general appropriation section. Amounts are as follows (staff numbers in parentheses):

REPEALER

Attorney Gene:al Commissioner of Insurance (7) Commissioner of Labor (8) State Fund Study Commission

1980 1981

$ 35,000 (1) $ 72,500 (3) $189,700 $184,100 $383,600 $323,700 $25,000 . >

[Related to Rec. No. 1, 14, 25, 49]

Section 70 repeals the former rate-making sections in chapter ·79, the current retraining benefits provision, and a provision, now unnecessary, allowing compensation judges to serve temporarily on the Workers' Compensation Appeals Court.

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EFFECTIVE DATES

Section 71 provides that the rate-making sections and the start-up provisions (not liability) of the reinsurance association are effective the day after enactment and the reinsurance association itself effective October 1, 1979. The Rating Bureau name change is also effective October 1, 1979. Benefit changes are effective October 1, pursuant to section 42. The balance of the bill is effective August 1.

COMPARISON OF S.F. 1 AND STUDY COMMISSION REPORT

Forty-six of the fifty-seven Workers' Compensation Study Commission recom­mendations were enacted in substantially the same form as originally proposed. Three of the recommendations (Nos. 2, 10 and 25) were enacted in significantly modified form and eight reconnnendations were not enacted (Nos. 3, 4, 5, 7, 9, 13, 20 and 50). Two minority recommendations (Nos. 4 and 16) were enacted and another change was made which related to two defeated motions (Nos. 7 and 8). One minority recommendations (No. 1) is to be studied. One minority recommendation (No. 6) was passed as a separate bill and another (No. 8) was passed by the Senate.

The major ~ifferences bewteen the Study Commission's recommendations and S.F. 1 are as follows:

Concurrent Payments of permanent total and permanent partial benefits are still permissible under S.F. 1, though permanent partial payments are partially delayed (25%. each month until return to work, balance then). [Rec. 2]

Minimum Benefit for Temporary Total Benefits is retained in S.F. 1. [Rec. 3]

Offset in Amount of Previous Workers' Compensation, Tort, or Other Compensation was deleted in S.F. 1. [Rec •. 4]

Maximum Benefit of 200% of SAWW was not enacted in S.F. 1. The current 100% maximum was retained. [Rec. 5, Minority Rec. 4]

104 Week "Waiting Period" Before Escalation Application was deleted in S.F. 1. [Rec. 7)

Presumption of Compensibility for Certain Conditions of Peace, Fi-re Officers was retained in S.F. land DNR forest officers were added. [Rec. 9)

50% Offset for Spouse's Earnings Against Death Benefits was deleted in S.F. 1. [Rec. 10)

·Mandatory Coverage for Public Officials was not enacted in S .. F .. 1. [Rec. 13]

Medical Carrier Treatment Notice Not Notice of Work-Related Injury was delted in S.F. 1. [Rec. 20]

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Workers' Compensation Appeals Court to Represent Employers, Employees and Public was not included in S.F. l though the increase to 5 judges and provision for lay judges were incor­porated. [Rec. 25]

Maximum Hage Base Calculation of Premium was not included in S.F. 1. [Rec. 50]

Vacation, Holiday and Sick-Time Exclusion from Premium Calculation was included in S.F. 1. [Minority Rec. 16]

Authority to Charge Premiums Lower than the Approved Rate is provi~ed in S.F. 1. [Related to Defeated Motions 7, 8]

* Presumption of Legality of Settlements When Parties Represented ·by Attorneys was passed separately by the Legislature as S.F. 1047. [Minority Rec. 6]

.,~ Authority for Workers' Compensation Judges to Enter a Finding of Degree of Disability Inbetween Those of the Parties passed the 3enate as S.F. 1338 but was not returned from the House. It was referred to the Labor-Management Relations Committee of the House.

DPS:dr

Ch. 3 Sections

Section 1 Section 2 Section 3 Section 4 Section 5

Section 6 Section 7 Section 8 Section 9 Section 10

Section 11 . Section 12 . Section 13 Section 14 . . Section 15 . .

Section 16 Section 17 Section 18 Section 19 Section 20 . Section 21 . Section 22 Section 23 . Section 24 Section 25 . .

Section 26 . Section 27 . . Section 28 . Section 29 Section 30

Section 31 . Section 32 . Section 33 . Section 34 Section 35

APPENDIX C Page 74

CROSS-REFERENCE KEY: WORKERS' COMPENSATION

STUDY COMMISSION REPORT AND Ch. 3 AS ENACTED

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Workers' Compensation Study Commission Recommendation

Rec • 39, 46, 49, 51 Rec . 49 Rec • 49 Rec . 49 Rec . 49

Rec . 42, 4J, 44 Rec • 49 Rec • 37 Rec. 46 Rec • 53, 54, 55, 56

[See Defeated Motions 7, 8] Rec • 45 [See Minority Rec. Rec. 29 [New] Rec. .48

Rec. 51, 52 Rec. 47 Rec. 47 Rec. 47 Rec. 47

Rec. 47 Rec. 47 Rec. 47 Rec. 47 Rec. 47

Rec. 25 Rec. 26 [Technical] Rec. 9 [Contra] Rec. 2 [Modified], 11

Rec. 40 Rec. 28 Rec. 3 [Contra], 5 [Contra] Rec. 5 [Contra], 8 [Technical]

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Ch. 3 Sections

Section 36 Section 37 . Section 38 Section 39 . Section 40

Section 41 . Section 42 Section 43 . Section 44 Section 45 . Section 46 Section 47 Section 48 . Section 49 Section 50

Section 51 Section 52 Section 53 Section 54 Section 55 . Section 56 Section 57 . Section 58 . Section 59 Section 60

Section 61 . Section 62 Section 63 . Section 64 Section 65

Section 66 Section 67. Section 68 Section 69. Section 70 Section 71 .

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Workers' Compensation Study Com.mission Recommendation

Rec . 1, 14 Rec . 10 [modified], 12 Rec . 32 Rec . 30 Rec . 31

[New] Rec . 43 Rec . 29 Rec. 35 Rec . 16 [modified]

Rec . 24 Rec • 21 Rec • 34 Rec • 6 Rec . 18 [modified]

[New] Rec • 33, 36 [New] Rec • 19 Rec • 19

Rec . 22, 23 [New] Rec • 41 Rec~ 34 [New]

Rec . 17 Rec . 8, 15 Rec . 27 Rec. 35 Rec . 49, 51

Rec. 25 [See Minority Rec. 1] Rec. 39 [Many Recs.] Rec. 1, 14, 25, 49 [Effective Dates.]

MINNESOTA HOUSE OF REPRESENTATIVES

RESEARCH DEPARTMENT

The HOUSE OF REPRESENTATIVES RESEARCH DEPARTi'-'ENT was est ab-1 i shed in 1967 to assist Representatives in the development, introduction, and evaluation of . legislation. The department is non-partisan _ and serves the entire membership of the House. Al I work for Representatives is carried out in an objective manner and a confidential relationship with each Representative is preserved.

During the LEGISLATIVE SESSION each legislative analyst in the department works in one or more areas and is avaiJable as a resource person to the corresponding House committee. In this capacity, analysts develop materials and draft legislation and amendments for the committees. Analysts

. also provide research and drafting assistance, issue analysis and background information directly to House members.

During the INTERIM the department conducts in-depth research on pertinent issues and provides research support for active committees. Analysts also continue to provide research and legislative drafting assistance to individual House members.